Hungary Raises Rate-Cut Threshold

Hungary’s central bank tightened the conditions for monetary easing after it cut borrowing costs to a record low in the first decision since Gyorgy Matolcsy took charge of rate policy. The forint strengthened.

The Magyar Nemzeti Bank reduced the two-week deposit rate by a quarter-point to 5 percent, cutting it for an eighth month and matching the forecast of 25 of 29 economists in a Bloomberg survey. Easing can only continue if uncertainty in the market environment abates, policy makers said in a statement.

“They’ve become more cautious and this is a positive surprise,” Eszter Gargyan, a Budapest-based economist at Citigroup Inc., said by e-mail.

Hungary’s currency had weakened as Matolcsy’s appointment sparked speculation over the direction of monetary policy, including the possible use of reserves to stimulate the economy and reduce foreign-currency loans. The country is in its second recession in four years and the central bank today said the inflation rate is headed below its 3 percent target “throughout” the horizon for monetary policy.

The forint jumped the most in more than a week, rising 0.9 percent against the euro to 303.43 by 4:02 p.m. in Budapest. That pared its loss to 2.7 percent in the past month, still the worst among more than 20 emerging-market currencies tracked by Bloomberg after the South African rand.

Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell
Dean Popplewell

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