Hungarian central bank leaves key rates unchanged


Base rate 0.6%, O/N deposit rate -0.05%

Decision in line with analyst expectations

Bank to issue statement at 1300 GMT

Possible Sept policy tweaks in focus

BUDAPEST, Aug 25 (Reuters) - The National Bank of Hungary left key interest rates unchanged on Tuesday, as expected, shifting attention to fresh signals about the policy outlook after a deeper-than-expected slump in second-quarter economic output.

All 12 economists in an Aug. 17-18 Reuters survey said the NBH would leave its base rate HUINT=ECI on hold at 0.6% after 15-basis-point cuts in the past two months to shore up the economy hit by the COVID-19 pandemic.

The bank also left its overnight deposit rate HUODPO=ECI steady at -0.05%. At 1201 GMT, the forint EURHUF=D3 traded at 353.5 versus the euro, a touch stronger than one-month-lows around 353.7 just before the announcement.

Central Europe's worst-performing currency has been on a weaker footing since second-quarter data showed the economy contracted by 13.6%, the deepest downturn in the region, which has also triggered a surge in the budget deficit.

Most analysts say the base rate would bottom out at its current level after July inflation data HUCPIY=ECI came in higher than expected.

Some economists, however, expect the NBH to lower its base rate further in 2020 in response to a weaker economic outlook, provided that inflation retreats in the coming months and the forint remains stable around the 350 mark to the euro.

"The FX market is likely to take a closer look at the central bank's statement," Commerzbank economist You-Na Park-Heger said. "If the central bank were to sound more dovish, the downward trend in HUF might continue in the near future."

The NBH, which has deployed a range of tools, including bond purchases, to bolster growth, has ruled out further cuts in the base rate, saying it aimed to keep a safe distance from near-zero levels elsewhere in central Europe.

However, it had described its surprise June rate reduction, the first such move in four years, as a one-off measure, only to cut the rate further in July.

(Reporting by Gergely Szakacs Editing by Larry King)

(( ; ; +36 1 882 3606 ;

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.