Hungary's monetary easing becomes worldwide sensation

Portfolio
The National Bank of Hungary (MNB) is joining the quantitative easing era just as major global counterparts such as the U.S. Federal Reserve look to leave it, Bloomberg reported on Wednesday. It seems the easing by the MNB has hit a nerve on an international level, as the news agency addresses the matter in a lengthy article.
The National Bank of Hungary will start buying mortgage-backed securities from January in its latest move to bring investors to heel and drive down interest rates.

“Departing from the approach of most small central banks focusing on short-term rates and inflation targeting, it’s looking to influence longer-term lending to home buyers and a government with one of the highest debt levels in eastern Europe," Bloomberg added.

The goal of the MNB, the news agency said, is to boost growth that has lagged other economies in ex-communist Europe and prevent a return of the explosive foreign-currency borrowing that forced Hungary into a 2008 IMF rescue

There are two things of which even our staunchest critics won’t accuse us: that we haven’t been sufficiently activist or creative. Our dear banking colleagues here surely have felt this in our deliberate and forceful actions

, Bloomberg cited MNB Deputy Governor László Windisch as telling a room full of banking executives on 4 December.

Expanding its unconventional toolkit, the MNB will assume interest-rate risk from lenders for up to 10 years by selling interest-rate swaps starting in January. The central bank will also buy as much as HUF 500 billion in mortgage notes.

“That’s a departure from other central banks across the continent that are considering tightening," Bloomberg said. It reminded that rate setters in the Czech Republic were the first in Europe to raise their benchmark twice this year, and Poland and Romania will probably start hiking next year.

When they started everyone was criticizing them, but they have really done a fine job so far. As we have seen in the euro area, with a lot of forced buyers, yields can be pushed lower

, said Andreas Rein, a money manager who oversees the equivalent of USD 1.2 billion of eastern European debt at Uniqa Capital Markets GmbH in Vienna.

"Even the most skeptical observers do not appear concerned that the NBH’s stance is creating fundamental imbalances in the country," Morgan Stanley economist Pasquale Diana said in a report on Tuesday.
 

More in Economy

bankjegy forint
April 12, 2024 12:35

Hungary central bank assesses March CPI data

Own measures of underlying inflation also show reducion

April 12, 2024 09:46

President Tamás Sulyok holds talks with Ukrainian President Volodymyr Zelensky

At the Three Seas Initiative's Vilnius summit

autóipar termelés gyártás gdp
April 12, 2024 09:31

Hungarian government aligns growth forecasts at last

Even the Economy Ministry no longer expects 4% GDP growth for 2024

Építkezés Építőipar
April 12, 2024 09:13

Construction industry fell in February, but still performs better than expected

February data show a rather tolerable decline compared to the January surge

varga mihály kormányinfó költségvetés
April 11, 2024 15:50

Even HUF 675 billion correction will not suffice, but Hungarian gov't buys some time at least

New fiscal adjustment measures evaluated

varga mihály gulyás gergely
April 11, 2024 12:52

Hungary cuts growth forecast, puts off public investment projects

Delays 2025 budget drafting to autumn

LATEST NEWS

Detailed search