Russian opposition activist Alexei Navalny arrested on arrival as he returns home
LONG READ: The oligarch problem
COVID-19 and Trump’s indifference helped human rights abusers in 2020
Durov rejects Western funds’ offer to buy 5%-10% of Telegram with $30bn valuation
One of Russia’s biggest wood product companies, Segezha could be Sistema’s next IPO
New Ukrainian VC firm QPDigital aims to invest up to $100 million in digital startups
EBRD investments reach record €11bn in pandemic-struck 2020
OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Estonian premier quits after Tallinn development scandal
Czech Pirates and Mayors approve final coalition agreement for 2021 elections
OUTLOOK 2021 Czechia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
OUTLOOK 2021 Hungary
Hungarian government remains silent after Capitol riots
World Bank expects modest recovery for Europe and Central Asia in 2021
OUTLOOK 2021 Slovakia
FDI inflows to CEE down 58% in 1H20 but rebound expected
Slovakia to invest €1.2bn in digitisation
BALKAN BLOG: The controversial recipe for building up Albania
Heavy flooding causes chaos in parts of Southeast Europe
Vodafone Albania plans €100mn infrastructure investments after AbCom merger
OUTLOOK 2021 Albania
Turnover rose on Bosnia's two stock exchanges in 2020 while prices fell
Storming parliaments: New Europe's greatest hits
Kyiv accuses Bosnian President Dodik of lying about icon gifted to Russian foreign minister
Sofia-based LAUNCHub Ventures holds first close of new fund on €44mn
ING THINK: Growth in the Balkans: from zero to hero again?
OUTLOOK 2020 Bulgaria
Labour demand down 28% y/y in Croatia in 2020
Zagreb Stock Exchange's Crobex10 index at highest level since March 5
OUTLOOK 2021 Kosovo
Arrera Automobili aims to launch Albania’s first supercar
World Bank revises projection for Moldova’s 2020 GDP decline to 7.2%
Moldova’s PM resigns to prepare the ground for early elections
Socialist lawmakers in Moldova scrap settlement on $1bn bank frauds
75% of Montenegrins want EU membership
Montenegro’s new ruling coalition carves up top state jobs
OUTLOOK 2021 Montenegro
North Macedonia's manufacturing confidence indicator down by 8.5 pp y/y in December
OUTLOOK 2021 North Macedonia
Transparency International warns of high corruption risk in CEE defence sectors
OUTLOOK 2021 Romania
Romania’s central bank cuts monetary policy rate by 25bp to 1.25%
Romanian construction companies' activity slows in November after intense 2020
OUTLOOK 2021 Serbia
Slovenia’s opposition files no-confidence motion against Jansa cabinet
Slovenia’s government to release funds to news agency STA after EU pressure
UK Moneyhub picks Slovenia for post-Brexit European base
Slovenia’s dire COVID-19 situation in 4Q20 caused second economic dip
Turkcell denies any affiliation with $1.6bn loan in default extended by Ziraat Bank to Virgin Islands company
BEYOND THE BOSPORUS: Let’s tentatively pencil in a date for Turkey’s hot money outflow
OUTLOOK 2021 Armenia
Armenia’s PM cautions conflict with Azerbaijan “still not settled” after trilateral meeting with Putin
COMMENT: Record high debt levels will slow post-coronavirus recovery, threaten some countries' financial stability, says IIF
OUTLOOK 2021 Georgia
Georgia’s political kingpin Bidzina Ivanishvili quits politics
Modern-day “Robin Hood” inspires Georgians drowning in debt
Iran’s navy conducts missile drill while analyst argues Trump even capable of nuclear strike in final days
TEHRAN BLOG: Who’s more credible? Johnson backing Trump’s Nobel chances or Iran applauding arrest warrant for US president?
Central Asia vaccination plans underwhelm, but governments look unruffled
Fears of authoritarianism as Kyrgyz populist wins landslide and backing for ‘Khanstitution’
OUTLOOK 2021 Kyrgyzstan
Mongolia's winter dzud set to be one of most extreme on record says Red Cross
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
OUTLOOK 2021 Tajikistan
China business briefing: Not happy with Kyrgyzstan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
Turkmenistan: The dammed united
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
OUTLOOK 2021 Uzbekistan
Download the pdf version
More...
The Monetary Council of the Hungarian National Bank (MNB) reduced the base rate by 15bp to 0.75% at a monthly policy meeting on June 23, marking the first rate cut since 2016.
The central bank's goal is to stimulate the economy, which is facing its worst crisis since 2008, benefit from disinflationary trends and the easing of volatility on global markets, analysts commented. The forint weakened on the news.
Rate-setters left the O/N deposit rate at -0.05% and the O/N and one-week collateralised loan rates at 1.85%. The O/N deposit rate and the collateralised loan rate mark the bottom and the top, respectively, of the central bank's interest rate corridor.
The MNB's rate-setting monetary council said in a statement that the move was a "fine-tuning measure" that "supports the maintenance of price stability and the recovery of economic growth". Central bank governor Gyorgy Matolcsy said this does not mark the beginning of a rate-cutting cycle.
The statement came as the bank released its quarterly inflation report in which it lifted the inflation forecast for 2020 and lowered its GDP growth estimate.
The central bank still sees growth of 0.3-2% this year, compared to an earlier estimate of 2-3%, which seems outrageously bullish to some analysts. Most analysts predict Hungary's GDP will contract by 4-5% this year after the pandemic hit key economic sectors like automotive production and tourism. The government forecasts a 3% decline.
The Monetary Council said strong disinflationary effects have appeared in the Hungarian economy due to the weaker external inflation environment and more muted domestic demand.
Following a temporary rise at the beginning of 2020, headline CPI quickly returned into the central bank's tolerance band before declining to its lower bound.
The MNB raised its forecasts for this year to 3.2-3.3%, up from the 2.6-2.8% in the March report. Inflation forecast for 2021 was lowered to 3.2-3.3% from the earlier estimate of 3.4-3.5%.
The tax-adjusted core inflation, seen as the bellwether of underlying inflationary trends, is expected to stand at 3.3-3.5% in 2020 and at 2.6-2.7% in 2021.
The central bank had to make decisions for the economy to take the expected jumpstart from Q3, MNB governor Gyorgy Matolcsy said at an online press conference after the decision. After a 2.2% growth in Q1 the Hungarian economy could have contracted by 7% y/y in the following quarter, Matolcsy said, explaining the base rate cut.
The aim is to make the business environment even more supportive, he said, adding that the MNB intended to signal to markets and central banks that it sees the base rate as important and that it has room for manoeuvre, he added.
Among the MNB's main goals, price stability, and the stability of the financial system has been preserved, and the third is to support the government's economic policy, he noted.
Investments are crucial for growth to start in Q3, so it is essential to keep the Hungarian investment rate at the 28-29% level it reached in the past years, said deputy governor Mihaly Patai.
The MNB is in the process of rethinking its bond purchase programme and its funding for growth scheme (NHP) to make them even more effective.
The MNB recently amended both programmes to improve access to fight the economic effects of the pandemic. Companies signed up for more than HUF100bn (€286mn) of low-interest loans. The MNB expects a dozen companies to issue bonds in excess of HUF200bn combined in Q3.
In related news, Marton Nagy, who surprisingly resigned from his post as deputy governor of the MNB on May 28, is set to become economic adviser to the prime minister, local media reported.
The forint traded at 350.6 to the euro after the decision was announced, softening from 348.7.
Register here to continue reading this article and 5 more for free or purchase 12 months full website access including the bne Magazine for just $250/year.
Register to read the bne monthly magazine for free:
Already registered
Password could contain only a-z0-9\+*?[^]$(){}=!<>|:-_ characters and have 8-20 symbols length.
Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.
Forgotten password?
Email field can't be empty.
No user with this email address.
Access recovery request has expired, or you are using the wrong recovery token. Please, try again.
Access recover request has expired. Please, try again.
To continue viewing our content you need to complete the registration process.
Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.
If you have any questions please contact us at sales@intellinews.com
Sorry, but you have used all your free articles fro this month for bne IntelliNews. Subscribe to continue reading for only $119 per year.
Your subscription includes:
For the meantime we are also offering a free subscription to bne's digital weekly newspaper to subscribers to the online package.
Click here for more subscription options, including to the print version of our flagship monthly magazine:
More subscription options
Take a trial to our premium daily news service aimed at professional investors that covers the 30 countries of emerging Europe:
Get IntelliNews PRO
For any other enquiries about our products or corporate discounts please contact us at sales@intellinews.com
If you no longer wish to receive our emails, unsubscribe here.
Magazine annual electronic subscription
Magazine annual print subscription
Website & Archive annual subscription
Combined package: web access & magazine print annual subscription