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Hungarian Forint Down After Surprise Interest Rate Cut

March 23, 2016 at 20:44 by Vladimir Vyun

Many Hungarian 20,000-forint billsThe Hungarian forint traded lower today after yesterday’s surprise from the nation’s central bank.

The Magyar Nemzeti Bank (the central bank of Hungary) lowered its main interest rate from 1.35% to 1.20% yesterday. The bank also cut other rates, including the overnight deposit rate that was reduced to -0.05%. This means that the Hungarian central banks joined the company of central banks with negative interest rates. The vast majority of analysts were unprepared for such decision.

Policy makers explained their decision by low inflation that is far below the bank’s target. The statement revealed that additional cuts to borrowing costs are likely:

Interest rate cuts will continue as long as monetary conditions become consistent with the sustainable achievement of the inflation target.

USD/HUF rose from 278.00 to 280.06 as of 20:41 GMT today. EUR/HUF gained from 311.40 to 313.04.

If you have any questions, comments or opinions regarding the Hungarian Forint, feel free to post them using the commentary form below.

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