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A new strategy at the Hungarian National Bank?

June 12th, 2020

An independent analyst suspects that the National Bank has abandoned its policy of keeping interest rates down at any price, in an effort to stabilize the exchange rate of the Forint.

On Portfolio, Károly Beke wonders if the National Bank has abandoned its previous strategy focusing on the lowest possible interest rates. Beke points out that in the two weeks since the resignation of Vice-President Márton Nagy, who was responsible for the National Bank’s monetary policy, the National Bank has not purchased government securities.  He recalls that the National Bank announced a program to buy government securities up to 1,000 billion Forints in order to keep interest rates low, but has eventually purchased securities for only 150 billion Forints. He goes on to note that 10-year interest rates sank after the announcement of the programme but are now on the rise again. Beke wonders if the National Bank has taken a U-turn and abandoned its policy to keep interest rates down and is focussing instead more on the stability of the Forint. (Over the past week, the Hungarian currency has regained half of the value it lost during the coronavirus emergency.)

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