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The bank cut its main interest rate for the
first time in eight months on March 24, by 15 basis points to
1.95 percent, as inflation evaporated. The rate is still above
the 1.5 percent benchmark in Central European heavyweight
Poland.
Deputy Governor Adam Balog said he believed there was still some
disinflationary risk in Hungary, even though recent months' data
did not show this.
"At this moment I definitely see a need for a longer easing
cycle, taking into account that this (disinflationary risks) is
a widespread risk, and at this moment we cannot see which
scenario will actually materialize," Balog said in an interview.
He said Hungary need not be constrained from cutting its rate
below the Polish benchmark.
"It is conceivable that we go lower (with our rate cuts), but it
is also conceivable that we don't," he said.
He also said recent forint gains pointed "in the direction of a
longer, rather than shorter easing cycle."
Balog reiterated that the bank had no exchange rate target,
adding that it did "not have any direct intention to weaken the
forint."
"If the exchange rate has an impact on inflation that prompts us
to act, then we will continue this easing cycle. Monetary policy
still has room for maneuver," he said.
The forint has firmed more than 1 percent versus the euro since
last month's cut.
Balog said the bank would tread cautiously with its rate cuts,
mindful of geopolitical and financial stability risks, such as
the conflict in Ukraine, or Greece's debt crisis.
"I would not like the main message to be that (Hungarian rate
cuts) will be always 15 basis points. Could be a bit bigger or a
bit smaller," he said.
Balog also said he could not rule out an extension beyond the
end of 2015 of the bank's "funding for growth" program, but it
did not want to exceed the 2 trillion forint cap it has set on
the cheap loans.
(Writing by Krisztina Than; Editing by Ruth Pitchford)
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