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MNB ends 7-year easing cycle

March 28th, 2019
As the National Bank marginally increases one of its interest rates, commentators remark that its consistent policy of fuelling economic growth has been modified, but without being abandoned altogether.

The MNB kept its key lending rate at a record low 0.9 percent on Tuesday, while it increased its overnight deposit rate from -0.15 percent to -0.05 percent.

In the headline to Gergő Rácz’s report on the decision, Magyar Nemzet announces the ‘opening of a new era’ in monetary policy. Rácz explains that the National Bank intended to show its intention to prevent overheating, after inflation reached the 3 per cent target as a result of consistent wage increases. Meanwhile, he continues, it has also launched a 300-billion-Forint bond purchase programme to underpin GDP growth.

Portfolio’s star analysts call the decision of the National Bank ‘curious’. In a jointly signed article, István Madár, Roland Pál and Attila Weinhardt think the MNB is walking a tightrope by simultaneously trying to keep up the growth momentum and keep inflation at bay. That endeavour can only be successful, they suggest, if the MNB’s expectation that the slowdown of Western economies will have a soothing effect on inflation, proves to be correct.


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