Hungarian Central Banker Sees Scope for Further Monetary Easing

Hungary has room to cut its interest rates even more from 1.95%, the lowest on record, because of falling consumer prices and a recent conversion of foreign-currency loans into forints, which has reduced the vulnerability of households, a central banker said. With consumer prices falling on an annual basis for sixth months in a row and posting an annual decline of 1% in February, the central bank last week cut its main interest rate by 0.15 percentage point to 1.95%, The Wall Street Journal reported. “This may provide room to go ahead with any form of monetary easing,” Gyula Pleschinger, a member of the nine-strong monetary policy council of the National Bank of Hungary, said in an interview. “But we have to be quite careful since Hungary is a small and open economy. We are therefore quite cautious with these moves.” Mr. Pleschinger hit a more cautious tone than central bank Governor Gyorgy Matolcsy, who said after the March 24 rate cut that the central bank is ready to lower its main policy rate as long as headline inflation isn’t near the bank’s 3% target. Most economists expect the central bank will continue to cut rates to 1.50% or even beyond. Read more. (Subscription required.)