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Budapest / Reuters
The scope for further cuts in the National Bank of Hungary’s record-low 1.2 percent base rate is increasingly limited, central bank Managing Director Barnabas Virag was quoted as saying on Saturday.
“The room to further reduce the central bank’s base rate is increasingly limited,†Virag, who is not a rate-setter but is in charge of monetary policy and financial stability, was quoted as saying by state news agency MTI.
The central bank took most analysts by surprise last month with a 15-basis-point rate reduction. Hungary also became the first of the main Central European economies to take its overnight deposit rate into negative territory.
Some analysts have said cuts in the value-added tax rate from next year, unveiled by Prime Minister Viktor Orban’s government this month, could keep inflation below the central bank’s 3 percent policy target for even longer.
The Hungarian National Bank is the central bank of the Hungary and as such part of the European System of Central Banks (ESCB). The Hungarian National Bank was established in 1924 and succeeded the Royal Hungarian State Bank, which introduced the Hungarian forint on 1 August 1946.
The Hungarian National Bank lays special emphasis on its international relations and on participation in the professional forums of international economic institutions and financial organisations (EU, IMF, OECD, BIS).
Its principal aim is price stability, but it is also responsible for issuing the national currency, the forint, controlling the money in circulation, setting the Central Bank base rate, publishing official exchange rates, and managing the foreign-exchange reserves and gold to influence exchange rates.
The Governor of the Hungarian National Bank is appointed by the President of Hungary at the proposal of the Prime Minister for a six-year term. The most important decision-making body of the Hungarian National Bank is the Monetary Council. Its building is located in Liberty Square, in the Inner City of Budapest, next to the US Embassy building.