Economy
Hungary's monetary easing becomes worldwide sensation
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
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.
"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.
“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.
