NBH cut rates to 4% and signal slow down in monetary easing
CNB again mentions FX interventions
The National Bank of Hungary (NBH) cut its base rate by 25bp from 4.25% to 4% in line with market expectations. It was the twelfth consecutive months in rate cut cycle. The statement of the Monetary Council highlighted that the domestic demand is still poor and may remain weak in the coming months, which keeps inflation pressure low, additionally in the wage growth dynamic slowed down, which suggest that companies are adjusting to higher production cost mainly through labor costs, so they see inflation target of 3% YoY achievable in 2014 as well. Hungary’s economic growth may remain below it potential level, which leaves room for further monetary easing as well. The statement had slightly more hawkish end. “The significant reductions in interest rates so far and the volatile conditions in financial markets may justify changing the pace or extent of policy easing over the coming months.”
Read the full report: FX Daily
KBC