China's central bank cut its benchmark lending and deposit rates by a further 25 basis points to counter the dampening impact on economic activity from the rise in real interest rates after economic restructuring and the sharp fall in international commodity prices pushed down consumer price inflation to what it described as "historic lows".
The People's Bank of China (PBOC), which last cut its lending rate by 40 basis points on Nov. 22, 2014, cut the one-year lending rate to 5.35 percent from 5.60 percent while the one-year deposit rate was cut to 2.5 percent from 2.75 percent.
In addition, the PBOC continued the process of allowing prices to become more market-oriented by raising the maximum that financial institutions can offer for deposits to 1.3 times the benchmark deposit rate from 1.2 times. In November the PBOC raised the limit from a previous 1.1 times.
The central bank described the higher deposit rate limit as an "important step" in its market-oriented reform the would help expand the floating range of interest rates on deposits, allow financial institutions further room to set their prices independently, improve the level of financial services along and improve the role of market interest rates in allocating resources.
China's consumer price inflation rate fell to 0.8 percent in January from 1.5 percent in December. The last time China's inflation rate was that low was in November 2009 when inflation rose to 0.6 percent and then 1.9 percent the following month after nine months of steady deflation.
The larger-than-expected fall in consumer price inflation, along with an annual 4.3 percent fall in January producer prices that illustrates overcapacity among China's factories, fueled expectations that the PBOC would cut its rates.
On Feb. 10 the bank made it clear that was ready to fight any further economic weakening due to weakening external demand.
China's Gross Domestic Product expanded by only 1.5 percent in the fourth quarter of 2014 from the third quarter for annual growth of 7.3 percent. Full-year 2014 growth was 7.4 percent, down from 2013's 7.8 percent, below the government's 7.5 percent target and the weakest growth in 24 years.
On Feb. 4 the PBOC cut its reserve requirement on big banks by 50 basis points to 19.50 percent, freeing up 600 billion yuan that was held as reserves, and economists are looking for further cuts.
www.CentralBankNews.info
Saturday, February 28, 2015
Friday, February 27, 2015
Angola maintains rates as pace of credit rise eases
Angola's central bank maintained its policy rates, including the benchmark Basic Interest Rate (BNA) at 9.0 percent, citing a slight decline January inflation along with a lower expansion of credit and a 1.27 percent average depreciation in the kwanza's exchange rate in January from December.
The National Bank of Angola (BNA), which last changed its policy rate in October 2014 when it raised the rate by 25 basis points, noted the annual inflation rate in January declined by 0.04 percentage points to 7.44 percent from December.
The stock of credit to the economy rose by an annual 14 percent in January to 3.394 billion kwanza, down from an increase of 17.14 percent in December.
The kwanza started depreciating against the U.S. dollar in September 2014 and has continued to ease this year, like most other currencies. The BNA said the average exchange rate of the kwanza to the dollar amounted to 104.171 in January.
Today the kwanza was quoted at 106.35 to the dollar, down 3.3 percent this year.
Angola's Gross Domestic expanded by 4.4 percent in 2014 from 2013 according to preliminary estimates from the BNA, but the oil-dependent economy is expected to slow down this year due to the fall in oil prices.
Last month Angola'sgovernment slashed $14 billion from planned spending.
Oil accounts for around half of Angola's economic output, 80 percent of tax revenues and 90 percent of export earnings, according to press reports.
The National Bank of Angola (BNA), which last changed its policy rate in October 2014 when it raised the rate by 25 basis points, noted the annual inflation rate in January declined by 0.04 percentage points to 7.44 percent from December.
The stock of credit to the economy rose by an annual 14 percent in January to 3.394 billion kwanza, down from an increase of 17.14 percent in December.
The kwanza started depreciating against the U.S. dollar in September 2014 and has continued to ease this year, like most other currencies. The BNA said the average exchange rate of the kwanza to the dollar amounted to 104.171 in January.
Today the kwanza was quoted at 106.35 to the dollar, down 3.3 percent this year.
Angola's Gross Domestic expanded by 4.4 percent in 2014 from 2013 according to preliminary estimates from the BNA, but the oil-dependent economy is expected to slow down this year due to the fall in oil prices.
Last month Angola'sgovernment slashed $14 billion from planned spending.
Oil accounts for around half of Angola's economic output, 80 percent of tax revenues and 90 percent of export earnings, according to press reports.
Central Bank News Link List - Feb 27, 2015: Fischer says odds greatest for rate rise in June, September
Here's today's
Central Bank News' link list, click through if
you missed the previous link list. The list comprises news about central banks
that is not covered by Central Bank News. The list is updated during the day
with the latest developments so readers don't miss any important news.
- Fischer says odds greatest for rate rise in June, September (Bloomberg)
- Turkish central bank head says to stay put after lira hits record low (Reuters)
- Inflation to rise 'within the year', BoE's Forbes says (Yorkshire Post)
- Dudley, top U.S. economists urge later Fed rate hike (Reuters)
- Next Bank of England move likely to be a rate hike – Shafik (Reuters)
- Fed not losing too much sleep over stronger dollar: Fisher (Reuters)
- Ukraine central bank will boost capital controls to avert panic (Bloomberg)
- BOJ Kuroda strikes back at QE critics, defends price goal timeline (Reuters)
- South Korean central bank restrained by record debt (Bloomberg)
- Ukraine heaps on economic pressures as central bank confuses (Reuters)
- Indonesia’s c.bank says no target level for rupiah (Reuters)
- Abe aims to tip balance on BOJ board (WSJ)
- Fed’s Williams: 1st rate hike appropriate this summer or fall (MNI)
- Poland seen cutting rates by 25 bps in March and in Q2: Reuters poll
- Bank of Canada to hold fire on interest rates next week: Reuters poll
- Australia expected to cut rates again (AAP)
- Will China join global trend to slash interest rates? (Want China Times)
- How much will you pay to park cash as central banks go negative? (Bloomberg)
- Bank of England to boost watchdog role after failing to spot forex rigging (Guardian)
- Morocco proposes to boost central bank independence (Reuters)
- Asset prices have overshot, correction will come: Fed’s Fisher (Reuters)
- Stage is set for another crises in the bond market (Bloomberg)
- Pakistan state bank to introduce ‘target rate’ (Dawn)
- Political attacks hurt economy, investment – Georgia central bank (Reuters)
2015 Global Central Bank Calendar - updated with Fiji, Albania
Following is the 2015 calendar for meetings by central bank committees that decide monetary policy.
The table includes scheduled meetings for more than 35 of the world's central banks. In the event that meetings by monetary policy committees take place over several days, the date listed below is for the final day when decisions are normally announced.
The calendar is updated regularly to reflect the latest information as some central banks have yet to release their meeting schedule for 2015. Other central banks only release tentative schedules and then finalize their calendar as the meeting nears. Work is underway to expand the number of central banks covered, including expanding the existing inflation targets table, and global interest rates table. You may replicate the table in part or in full only if you link to this page.
Central Bank News - 2015 Global Central Bank Calendar
The table includes scheduled meetings for more than 35 of the world's central banks. In the event that meetings by monetary policy committees take place over several days, the date listed below is for the final day when decisions are normally announced.
The calendar is updated regularly to reflect the latest information as some central banks have yet to release their meeting schedule for 2015. Other central banks only release tentative schedules and then finalize their calendar as the meeting nears. Work is underway to expand the number of central banks covered, including expanding the existing inflation targets table, and global interest rates table. You may replicate the table in part or in full only if you link to this page.
Central Bank News - 2015 Global Central Bank Calendar
| MARCH | |||
| 3-Mar | AUD | Australia | Reserve Bank of Australia |
| 4-Mar | BRL | Brazil | Central Bank of Brazil |
| 4-Mar | CAD | Canada | Bank of Canada |
| 4-Mar | PLN | Poland | National Bank of Poland |
| 4-Mar | ALL | Albania | Bank of Albania |
| 5-Mar | EUR | Euro area | European Central Bank |
| 5-Mar | GBP | United Kingdom | Bank of England |
| 5-Mar | MYR | Malaysia | Central Bank of Malaysia |
| 11-Mar | THB | Thailand | Bank of Thailand |
| 12-Mar | KRW | Korea | Bank of Korea |
| 12-Mar | NZD | New Zealand | Reserve Bank of New Zealand |
| 12-Mar | PEN | Peru | Central Reserve Bank of Peru |
| 12-Mar | RSD | Serbia | National Bank of Serbia |
| 13-Mar | RUB | Russia | Bank of Russia |
| 17-Mar | JPY | Japan | Bank of Japan |
| 17-Mar | TRY | Turkey | Central Bank of Republic of Turkey |
| 17-Mar | IDR | Indonesia | Bank Indonesia |
| 18-Mar | USD | United States | Federal Reserve |
| 19-Mar | NOK | Norway | Norges Bank |
| 18-Mar | ISK | Iceland | Central Bank of Iceland |
| 19-Mar | CHF | Switzerland | Swiss National Bank |
| 19-Mar | CLP | Chile | Central Bank of Chile |
| 23-Mar | ILS | Israel | Bank of Israel |
| 24-Mar | MAD | Morocco | Bank of Morocco |
| 24-Mar | HUF | Hungary | Central Bank of Hungary |
| 24-Mar | NGN | Nigeria | Central Bank of Nigeria |
| 25-Mar | GEL | Georgia | National Bank of Georgia |
| 25-Mar | UAH | Ukraine | National Bank of Ukraine |
| 26-Mar | PHP | Philippines | Central Bank of Philippines |
| 26-Mar | MXN | Mexico | Banco de Mexico |
| 26-Mar | ZAR | South Africa | South African Reserve Bank |
| 26-Mar | CZK | Czech Republic | Czech National Bank |
| 26-Mar | FJD | Fiji | Reserve Bank of Fiji |
| 26-Mar | MDL | Moldova | National Bank of Moldova |
| 27-Mar | XCD | Eastern Caribbean | Eastern Caribbean Central Bank |
| 27-Mar | TTD | Trinidad and Tobago | Central Bank of Trinidad and Tobago |
| 30-Mar | KGS | Kyrgyzstan | National Bank of the Kyrgyz Republic |
Thursday, February 26, 2015
Kenya holds rate, monitors FX rate and inflation
Kenya's central bank maintained its benchmark Central Bank Rate (CBR) at 8.50 percent, noting it was keeping a close eye on any impact on the shilling's exchange rate and domestic inflation from possible volatility in global foreign exchange markets in response to the divergent path of monetary policy in major advanced economies.
The Central Bank of Kenya (CBK), which has kept its benchmark rate steady since May 2013, said the favorable impact of lower oil prices helped support price stability, confidence in the country's economy remains strong and the shilling has continued to benefit from strong investor confidence that was boosted by the International Monetary Fund's (IMF) approval of a precautionary facility.
On. Feb. 2 the IMF's executive board approved a stand-by arrangement that amounted to a total of US$688 million that will allow the country's government access to funds to cushion any external shocks to the economy while economic reforms are being carried out.
The CBK said its stock of usable foreign exchange reserves amounted to US$7.224.19 billion as of Feb. 26, down from $7.424.7 billion at the end of December, but still a level that provides a "robust cushion" along with the IMF facility against any shocks that could trigger excess exchange rate volatility.
The shilling started depreciating against the dollar in October 2013 and was close to hitting 92 to the dollar - a level not seen since November 2011 - in late January before it reversed course. Today the shilling was quoted at 91.5 to the dollar, down about one percent since the start of the year.
Kenya's inflation rate rose slightly to 5.6 percent in February from 5.5 percent in January, a rise the central bank had expected.
www.CentralBankNews.info
The Central Bank of Kenya (CBK), which has kept its benchmark rate steady since May 2013, said the favorable impact of lower oil prices helped support price stability, confidence in the country's economy remains strong and the shilling has continued to benefit from strong investor confidence that was boosted by the International Monetary Fund's (IMF) approval of a precautionary facility.
On. Feb. 2 the IMF's executive board approved a stand-by arrangement that amounted to a total of US$688 million that will allow the country's government access to funds to cushion any external shocks to the economy while economic reforms are being carried out.
The CBK said its stock of usable foreign exchange reserves amounted to US$7.224.19 billion as of Feb. 26, down from $7.424.7 billion at the end of December, but still a level that provides a "robust cushion" along with the IMF facility against any shocks that could trigger excess exchange rate volatility.
The shilling started depreciating against the dollar in October 2013 and was close to hitting 92 to the dollar - a level not seen since November 2011 - in late January before it reversed course. Today the shilling was quoted at 91.5 to the dollar, down about one percent since the start of the year.
Kenya's inflation rate rose slightly to 5.6 percent in February from 5.5 percent in January, a rise the central bank had expected.
www.CentralBankNews.info
Egypt holds rate, low oil counters supply bottlenecks
Egypt's central bank maintained its key policy rates, noting that upside risks to inflation from domestic supply shocks are lessened by the impact of lower oil prices on import prices, including the downward revision in international food prices.
The Central Bank of Egypt (CBE), which cut rates by 50 basis points in January, maintained its overnight deposit rate at 8.75 percent, the overnight lending rate at 9.75 percent, the rate on its main operation at 9.25 percent and the discount rate at 9.25 percent.
Egypt's consumer price inflation - which jumped to 11.04 percent in July 2014 after a government cut in fuel subsidies - continued its downward trend in January, declining to 9.7 percent from 10.13 percent in December.
But the CBE noted that on a monthly basis, inflation rose by 0.99 percent due to adjustments in administered prices and supply bottlenecks from the distribution of butane cylinders.
The CBE noted that Egypt's economic output "jumped significantly" in the first quarter of the 2014/15 financial year - the third calendar quarter - with Gross Domestic Product up by an annual 6.8 percent, the highest annual growth rate since the fourth quarter of 2007/08.
It attributed higher output to continuous growth in manufacturing and an expansion of tourism after several quarters of contraction. Investment improved for the third consecutive quarter.
However, the CBE repeated that the challenges facing the euro area and softer growth in emerging markets could pose downside risks to economic growth despite the contribution from the expansion of the Suez Canal.
The Central Bank of Egypt (CBE), which cut rates by 50 basis points in January, maintained its overnight deposit rate at 8.75 percent, the overnight lending rate at 9.75 percent, the rate on its main operation at 9.25 percent and the discount rate at 9.25 percent.
Egypt's consumer price inflation - which jumped to 11.04 percent in July 2014 after a government cut in fuel subsidies - continued its downward trend in January, declining to 9.7 percent from 10.13 percent in December.
But the CBE noted that on a monthly basis, inflation rose by 0.99 percent due to adjustments in administered prices and supply bottlenecks from the distribution of butane cylinders.
The CBE noted that Egypt's economic output "jumped significantly" in the first quarter of the 2014/15 financial year - the third calendar quarter - with Gross Domestic Product up by an annual 6.8 percent, the highest annual growth rate since the fourth quarter of 2007/08.
It attributed higher output to continuous growth in manufacturing and an expansion of tourism after several quarters of contraction. Investment improved for the third consecutive quarter.
However, the CBE repeated that the challenges facing the euro area and softer growth in emerging markets could pose downside risks to economic growth despite the contribution from the expansion of the Suez Canal.
Moldova maintains rate, still sees inflation above limit
Moldova's central bank maintained its key rate, including the base rate at 13.5 percent, with its policy stance still determined by the forces of inflationary pressures stemming from a depreciation of the leu currency and the economic weakness of its main trading partners.
The National Bank of Moldova, which raised its rate by 500 basis points at an extraordinary board meeting on Feb. 17, repeated it still expects consumer price inflation to temporarily breach the upper limit of its target range due to the impact of currency depreciation on import prices and utility tariffs.
The National Bank targets inflation at a midpoint of 5.0 percent, within a lower limit of 3.5 percent and an upper limit of 6.5 percent, and said its decision to hold its rate steady was aimed an anchoring inflation expectations, which it fears will rise, at that level.
The headline inflation rate in Moldova - a former Soviet state located between Romania to the east and Ukraine to the north, south and east - was steady at 4.7 percent in January and has remained within the central bank's target range since February 2012.
In January, the central bank forecast an average inflation rate of 5.8 percent this year and 6.1 percent in 2016.
After tumbling by by 16.5 percent against the U.S. dollar in 2014, the leu continued to drop until Feb. 10 when it fell to over 19.0 to the dollar, down over 30 percent since the start of 2014 and down 18 percent this year alone.
But since Feb. 10 the leu has stabilized and risen slightly, hitting 18.4 to the dollar today, in response to rate hikes, low liquidity of foreign exchange and a new prime minister.
Remittances from foreign workers to Moldova was down by an annual 29.2 percent in January, slightly better than a 30 percent decline in December, while exports and imports in 2014 fell by 3.7 percent and 3.2 percent, respectively, compared with 2013, the bank said.
However, industrial production and the transport of goods increased by 7.3 percent and 4.0 percent, respectively, in 2014, the central bank said.
www.CentralBankNews.info
The National Bank of Moldova, which raised its rate by 500 basis points at an extraordinary board meeting on Feb. 17, repeated it still expects consumer price inflation to temporarily breach the upper limit of its target range due to the impact of currency depreciation on import prices and utility tariffs.
The National Bank targets inflation at a midpoint of 5.0 percent, within a lower limit of 3.5 percent and an upper limit of 6.5 percent, and said its decision to hold its rate steady was aimed an anchoring inflation expectations, which it fears will rise, at that level.
The headline inflation rate in Moldova - a former Soviet state located between Romania to the east and Ukraine to the north, south and east - was steady at 4.7 percent in January and has remained within the central bank's target range since February 2012.
In January, the central bank forecast an average inflation rate of 5.8 percent this year and 6.1 percent in 2016.
After tumbling by by 16.5 percent against the U.S. dollar in 2014, the leu continued to drop until Feb. 10 when it fell to over 19.0 to the dollar, down over 30 percent since the start of 2014 and down 18 percent this year alone.
But since Feb. 10 the leu has stabilized and risen slightly, hitting 18.4 to the dollar today, in response to rate hikes, low liquidity of foreign exchange and a new prime minister.
Remittances from foreign workers to Moldova was down by an annual 29.2 percent in January, slightly better than a 30 percent decline in December, while exports and imports in 2014 fell by 3.7 percent and 3.2 percent, respectively, compared with 2013, the bank said.
However, industrial production and the transport of goods increased by 7.3 percent and 4.0 percent, respectively, in 2014, the central bank said.
www.CentralBankNews.info
Egypt maintains rates, to issue statement later
Egypt's central bank maintained its key policy rates, including the benchmark overnight deposit rate, and will issue a statement by its Monetary Policy Committee later today.
The Central Bank of Egypt (CBE) held its overnight deposit rate steady at 8.75 percent, the overnight lending rate at 9.75 percent, the rate on its main operation at 9.25 percent and the discount rate at 9.25 percent.
The CBE surprised most economists last month by cutting its rates by 50 basis points as it considered the upside risks to inflation to be contained by lower oil and food prices while there were risks to the country's economic growth from the challenges facing the euro area and softer growth in emerging market economies.
The CBE raised its rate by 100 basis points in July 2014 following a government cut in fuel subsidies that pushed up fuel prices sharply and thus inflation.
Egypt's consumer price inflation rate jumped to 11.04 percent in July 2014 but has slowly declined since then, reaching 9.7 percent in January. Core inflation also fell to 7.06 percent in January from 7.69 percent in December.
The CBE currently aims at "low rates of inflation" but has said it intends to adopt an inflation-targeting policy framework.
www.CentralBankNews.info
The Central Bank of Egypt (CBE) held its overnight deposit rate steady at 8.75 percent, the overnight lending rate at 9.75 percent, the rate on its main operation at 9.25 percent and the discount rate at 9.25 percent.
The CBE surprised most economists last month by cutting its rates by 50 basis points as it considered the upside risks to inflation to be contained by lower oil and food prices while there were risks to the country's economic growth from the challenges facing the euro area and softer growth in emerging market economies.
The CBE raised its rate by 100 basis points in July 2014 following a government cut in fuel subsidies that pushed up fuel prices sharply and thus inflation.
Egypt's consumer price inflation rate jumped to 11.04 percent in July 2014 but has slowly declined since then, reaching 9.7 percent in January. Core inflation also fell to 7.06 percent in January from 7.69 percent in December.
The CBE currently aims at "low rates of inflation" but has said it intends to adopt an inflation-targeting policy framework.
www.CentralBankNews.info
Wednesday, February 25, 2015
Central Bank News Link List - Feb 25, 2015: Israeli interest rates could go below zero–c. bank dep. governor
Here's today's
Central Bank News' link list, click through if
you missed the previous link list. The list comprises news about central banks
that is not covered by Central Bank News. The list is updated during the day
with the latest developments so readers don't miss any important news.
- Israeli interest rates could go below zero–central bank deputy governor (Reuters)
- Ukraine currency in limbo after central bank bans most trade (Reuters)
- Bank regulation takes back seat to kick-starting economy (Reuters)
- Draghi accelerating on easy street won’t overtake Yellen soon (Bloomberg)
- China central bank newspaper warns of rising deflation risk (Reuters)
- Yellen set to deliver identical testimony on Fed policy: congressional aide (Reuters)
- Serb central bank orders relief for holders of Swiss franc loans (Reuters)
- ECB Coene: Eurozone exit ‘theoretically’ possible – press (MNI)
- Sweden’s central bank chief and new deputy at odds over policy (Reuters)
- Brazil’s inflation picks up, well above central bank target (Dow Jones)
- Mexico inflation nears 4-year low, closes in on central bank target (Reuters)
- Australia rate cut chances increase as wage growth stagnates (SMH)
- ECB’s longer-term loans expire with 3-year bond rally legacy (Bloomberg)
- External advisor urged RBI to cut rates by 75 bps (Reuters)
- Shelby eyes curbs on New York Fed rather than backing audit bill (Bloomberg)
- Central banks should move beyond inflation targets, Poloz says (Globe & Mail)
- Georgia central bank flags commercial dollar loan restructuring (Reuters)
- Turkey’s central bank fiasco (Bloomberg View)
- BOE launches search for theories of almost everything (WSJ)
- The Bank of England dove hunt is on (WSJ)
- Zambia central bank to regulate bank charges (Zambia Daily Mail)
Tuesday, February 24, 2015
Central Bank News Link List - Feb 24, 2015: Fed’s Yellen flags rate hikes on ‘meeting-by-meeting’ basis
Here's today's
Central Bank News' link list, click through if
you missed the previous link list. The list comprises news about central banks
that is not covered by Central Bank News. The list is updated during the day
with the latest developments so readers don't miss any important news.
- Fed’s Yellen flags rate hikes on ‘meeting-by-meeting’ basis (Reuters)
- Yellen’s semiannual monetary policy report to the Congress (Federal Reserve)
- Treasuries advance after Yellen signals Fed to be flexible (Bloomberg)
- BOE MPC say more likely than not next rate move up (MNI)
- Low interest rates could threaten UK economy, warns BOE’s Forbes (Telegraph)
- What 28 central banks will do this year (Bloomberg)
- Fed’s Williams says wouldn’t rule out June rate hike-Nikkei (Reuters)
- Malaysia doesn’t expect deflation to take hold, central bank says (Dow Jones)
- Polish rate cuts won’t help spur economy, Winiecki says (Bloomberg)
- Satyajit Das: The Swiss have done for central banking what Ferguson has done for policing (The Independent)
- Thailand policy rate already low-deputy c.bank governor (Reuters)
- Japan lower house approves reflationist Harada for BOJ board (Reuters)
Hungary holds rate but will consider rate cut in March
Hungary's central bank maintained its base rate at 2.0 percent but said it will "consider the need for possible further easing of monetary conditions" in March when it reviews the outlook for inflation.
The National Bank of Hungary (MNB), which ended a two-year easing cycle in July 2014 after cutting the rate by 490 basis points, said data showed a "further shift towards the alternative scenario implying looser monetary policy" and the "probability of second-round effects taking hold in the wake of disinflationary trends in the economy as well as a change in inflation expectations has increased."
Last month the MNB also referred to its alternative scenario outlined in its December inflation report but underscored today that it was becoming more convinced of the need to ease its monetary policy stance in March to avoid a further fall in inflation expectations and persistent deflation.
Minutes from the MNB's council meeting in January showed that its members did not yet see any second-round effects of lower oil prices so inflation was likely to move toward the central bank's 3.0 percent in the second half of 2016.
The central bank's December inflation report included two scenarios that laid out the case for easier policy based on continued low oil prices, a weak inflationary environment and low external demand.
The central bank said recent data for the price of market services had showed a possible rise in the probability of second-round effects of lower oil prices on the domestic economy and wages.
Hungary's headline inflation rate fell further to minus 1.4 percent in January from minus 0.9 percent in December, the fifth consecutive month of deflation.
Many economists had expected the Hungarian central bank to prepare financial markets for a rate cut in March and bond markets are already pricing in a rat cut. A recent poll also showed that the consensus forecast the base rate at the end of this year had failed to 1.6 percent from 2.1 percent during February.
The National Bank of Hungary (MNB), which ended a two-year easing cycle in July 2014 after cutting the rate by 490 basis points, said data showed a "further shift towards the alternative scenario implying looser monetary policy" and the "probability of second-round effects taking hold in the wake of disinflationary trends in the economy as well as a change in inflation expectations has increased."
Last month the MNB also referred to its alternative scenario outlined in its December inflation report but underscored today that it was becoming more convinced of the need to ease its monetary policy stance in March to avoid a further fall in inflation expectations and persistent deflation.
Minutes from the MNB's council meeting in January showed that its members did not yet see any second-round effects of lower oil prices so inflation was likely to move toward the central bank's 3.0 percent in the second half of 2016.
The central bank's December inflation report included two scenarios that laid out the case for easier policy based on continued low oil prices, a weak inflationary environment and low external demand.
The central bank said recent data for the price of market services had showed a possible rise in the probability of second-round effects of lower oil prices on the domestic economy and wages.
Hungary's headline inflation rate fell further to minus 1.4 percent in January from minus 0.9 percent in December, the fifth consecutive month of deflation.
Many economists had expected the Hungarian central bank to prepare financial markets for a rate cut in March and bond markets are already pricing in a rat cut. A recent poll also showed that the consensus forecast the base rate at the end of this year had failed to 1.6 percent from 2.1 percent during February.
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