Hungarian rate-setter says positive real interest rate is a must
The vast majority of central banks in developed and developing or emerging countries, including the MNB, consider maintaining a positive real interest rate as an important tool for reducing inflation, Gyula Pleschinger, a member of the Monetary Council of the Magyar Nemzeti Bank (MNB), told Világgazdaság.
He said that the degree of positive real interest rate in Hungary depends to a large extent on the global environment. The lesson of economic history is clear: when yields are rising rapidly in large developed markets, the risk of a ripple effect in emerging markets is increasing, he added.
The Monetary Council member was also asked about the fact that the central bank had launched significant stimulus programmes in the past, but he stressed that opening similar programmes is not on the table now, and that they were focusing on their primary task of reducing inflation and stabilising the financial system.
The primary objective is to ensure price stability and bring inflation back to the 2-4% range. The second is to preserve financial stability. The achievement of these objectives can support the government's economic policies and help the Hungarian economy to go green,
stated Pleschinger.
The interest rate level of around 11% expected by the end of the year can be reached if there are no unexpected events, such as market turbulences similar to last autumn, another war, a drastic rise in energy prices, and inflation is indeed in the 7-8% range by December, Gyula Pleschinger said.
At the last policy meeting, the council members discussed several scenarios, and the minutes, which will be published later, will show whether they were unanimous or there were dissenting votes (after the meeting, Deputy Governor Barnabás Virág spoke of a unanimous decision). Pleschinger revealed that they had considered the alternatives of a 50, 75 and 100 basis point cut and came to the clear conclusion that they would slow down the pace of interest rate cuts, hence the 75 basis point easing.
Cover photo: MTI Photo/Péter Komka
