Tuesday, October 26, 2010

Hungary and Israel hold rates steady at 5.25% and 2.00%

The Magyar Nemzeti Bank, and Bank of Israel joined a growing trend world-wide toward holding off on raising interest rates as currency pressures and global uncertainties come to fore.

The Magyar Nemzeti Bank of Hungary held its central bank base rate at 5.25%, due to uncertainties about the inflation outlook and risks to growth. Looking to the last paragraph of its announcement:
The Monetary Council has decided to leave interest rates unchanged in light of the uncertainty about the inflation outlook and a prolonged period of output below potential. If upside risks to inflation materialise or there is a sustained increase in perceptions of the risks associated with the economy, an increase in the central bank base rate may be necessary.
Meanwhile, the Bank of Israel held its policy interest rate at 2.00%, as simply one of the tools in achieving price stability in the face of a stubborn house price inflation situation, and a desire to avoid risks to economic growth. Looking to the announcement:
In light of the Bank of Israel's decision to introduce a further macroprudential measure with regard to housing finance, and its implications for inflation, and in light of the indications of a slowdown in growth, the Governor decided to keep the rate of interest unchanged for November, at 2 percent.
The Bank of Israel will continue to monitor Israeli and worldwide economic and financial developments, and will use the instruments available to it to achieve its objectives of price stability, the encouragement of employment and growth, and support for the stability of the financial system, including keeping a close watch on developments in the housing market, and specially on house prices.

So more and more central banks are holding interest rates at the relatively low and stimulatory levels due a variety of reasons, but in common - concerns about the path of the global economic recovery. The Reserve Bank of New Zealand is set to meet this week, as is the Bank of Japan - both of which are likely also to hold.



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