Magyar Nemzeti Bank (Hungarian Central Bank) decided today during the Monetary Council’s meeting to hold the main refinancing interest rate at the same level — 7.50%, after the last cut made from 7.75% by MNB on September 25.
Hungary is still maintaining the highest interest rate in the European Union. While the target inflation of the central bank is 3.0% the actual number is far from it — 7.1% according to the November data. Fighting such a high inflation with lowering the interest rate is nonsense, so the MNB can continue with the unchanged rate for quite a long period of time.
While the inflation is rising above the desired level in Hungary, the GDP growth is slowing down. Third quarter gain compared to the last year’s Q3 number is just 0.9% up — a record low ouput gain since the nineties. This economic indicator is calling for the rate cut, but alas the balance between the prices inflation and economy growth should be held with great care.
After the central bank press release Hungarian Forint continued its fall against U.S. dollar, which started last Friday with 2.2% gain on USD/HUF. Today USD/HUF climbed up more than 0.5% on the positive data from U.S. and on the pessimistic statement by Hungarian Central Bank.
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