Hun­gary cen­tral bank pushes rate into neg­a­tive ter­ri­tory

The Pak Banker - - FRONT PAGE -

Hun­gary's cen­tral bank said it had low­ered one of its in­ter­est rates into neg­a­tive ter­ri­tory for the first time, faced with with a dras­ti­cally weaker in­fla­tion out­look. The rate for funds parked by com­mer­cial banks with the cen­tral bank overnight now stands at -0.05 per­cent.

The bank also cut its main in­ter­est rate to 1.20 per­cent, also a his­toric low, from 1.35 per­cent pre­vi­ously. The cen­tral bank said fur­ther cuts would fol­low if needed for it to reach its in­fla­tion tar­get of close to 3 per­cent.

The bank's cur­rent fore­cast is for av­er­age in­fla­tion rate of 0.3 per­cent this year, slashed from its 1.7 per­cent es­ti­mate made in De­cem­ber.

"In­fla­tion ex­pec­ta­tions fell fur­ther and are at his­tor­i­cally low lev­els," it said. Gross do­mes­tic prod­uct (GDP) growth of 2.8 per­cent is now ex­pected for this year, up from a pre­vi­ous 2.5 per­cent es­ti­mate.

Ear­lier this month the ECB low­ered to zero its lead­ing "refi" in­ter­est for the eu­ro­zone, which is Hun­gary's main trad­ing part­ner, and pushed its overnight de­posit rate down to - 0.4 per­cent. Hun­gary is a mem­ber of the Euro­pean Union but not the eu­ro­zone.

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