Hungary’s central bank announces support for the forint

The Hungarian central bank wants its entire monetary policy instruments, to the national currency forint to help. This will encourage the banks, which recently introduced new tools to provide greater liquidity to use, and also EU funds pumped into the market, the currency shared with guardians.
Thus, the central bank to the banking system as of today euro liquidity for three months.

Dealers evaluated these statements as a strong “verbal intervention”. Apparently, the exchange rate of the forint reached a level that the guardians of the currency concerned meet stated. Also interest rates now could not be excluded. At its meeting on 23 February, the central bank’s key interest at 9.5 percent remains unchanged.

The forint has only in the past week, the euro depreciated 4.5 percent on Friday and lost to 317.22 forint marked a record low. Trigger was that the EU is requested by the Hungarian Prime Minister’s relief package for the Eastern European states had rejected.

The devaluation of the forint in recent weeks was not fundamentally justified, said the central bank after two unscheduled meetings of the monetary policy committee on Friday and Sunday: “The banking system of the country that despite the recent weakness Forint stable.”

Even the Western parent companies of domestic-funded banks and their subsidiaries continue to contribute to the dependence on the international capital markets to collapse. Also go to the financing needs of Hungary in view of rising domestic savings and a strict fiscal policy “quickly and substantially” back.

However, the pressure on the country’s medium-term adverse currency impact on the capital position of the banking system. Moreover, a prolonged weakness of the forint, the central bank’s inflation target of three percent in jeopardy. A weak currency increases import prices and hence inflation.

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