Hungary’s central bank is weighing its first steps toward lowering the European Union’s highest key interest rate as policymakers expect inflation to fall sharply in the months ahead.
(Bloomberg) — Hungary’s central bank is weighing its first steps toward lowering the European Union’s highest key interest rate as policymakers expect inflation to fall sharply in the months ahead.
The central bank may first cut the top end of its rate corridor, currently at 25%, as soon as next week, Deputy Governor Barnabas Virag told news site Vilaggazdasag in an interview published on Wednesday. He said the size of that move would be “significant” given the improvement in market sentiment.
“The question of changing the 18% key interest rate can only be on the agenda of subsequent rate decisions,” Virag said, adding that a “patient approach prioritizing market stability” was still needed.
It wasn’t immediately clear from Virag’s comment whether the key interest rate cut may be considered already on Wednesday of next week — the day after the monthly rate decision — or whether it would need to be debated by the full Monetary Council at subsequent monthly meetings.
The overnight deposit rate, which is decided daily on trading days, was created as an emergency intervention in October of last year to halt the slide of the currency after a record drop.
It has gained more than 10% against the euro, rising to the highest in a year this week and making it one of the best-performing globally.
The forint was down 0.3% against the euro by 8:03 a.m. in Budapest in early Tuesday trading, slightly underpeforming its regional emerging-market peer, the Polish zloty.
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