Hungarian National Bank holds key rate steady at 2.10%
More robust domestic market cited as reason for policy continuation
EURHUF descends leaving channel traders looking for a retracement
Carrying the same sentiment forward from the October 28th meeting, the MPC once more voted to maintain the current base rate of 2.10%. While output remains below potential, growth is expected to progress as domestic demand strengthens, relieving disinflationary pressures.
Gathering pace, domestic demand led to a recovery in September’s industrial production volumes. After contracting 5.7% in August, seasonally adjusted production rose in September to 2.7%. The subsections driving the expansion include: transport equipment, food products, and consumer electronics. The trade surplus also experienced an increase of 0.8% in EUR terms (HUF 299 billion). Retail sales (+4.5%) also held steady following an employment increase in Q3 (+4.8%). Moving forward, investment is also likely to get an assist as EU funds are increasingly being used and the Funding for Growth Scheme continues to foster a favorable lending environment.
A more robust domestic market, favorable growth report and reversal in economic sentiment are reasons enough, in the Council’s judgment, to hold interest rates steady in achieving the medium-term price stability target (+3.0%).
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