Hungary Central Bank Retains Record Low Rate

“The committee… will not hesitate to act appropriately should the risks to the inflation outlook deteriorate materially”, he said. The Brazilian real and the South African rand, two vulnerable EM currencies, have lost a further 7.3 per cent and 4.6 per cent respectively against the dollar since the Fed’s decision.


Kganyago on Wednesday reaffirmed the bank’s commitment to the rate-hiking cycle – to reach a normalisation of what had been historically low rates – which resumed in January 2014.

Reserve Bank Governor Lesetja Kganyago says the Monetary Police Committee (MPC) was unanimous when deciding to keep the repo rate unchanged, but it’s anxious the country’s economic situation may change soon.

“In essentially sticking with the 4.5% neural view, the implication is the Reserve Bank views the current 90-day rate of 2.84% as very stimulatory, and were stimulatory before the Bank commenced its easing cycle in June this year“. Jeffrey Lacker, at the Richmond Reserve Bank, voted to raise rates by 0.25 per cent. Higher food prices and low commodity prices are also expected to weigh heavily on the economy for the rest of 2015, he said.

The previous Caixin/Markit flash PMI released in August showed China’s factory sector shrank at the fastest pace in almost 6-1/2 years, helping to fuel a selloff in global equities.While another weak reading could spark more market turmoil, the reaction will probably be tamer than last month, said Jesper Bargmann, head of trading for Nordea Bank in Singapore.

“In saying that, the Reserve Bank does acknowledge that the models highlight an “emerging risk that the neutral interest rate is falling further”. If inflation is low, it will position the OCR below the neutral rate. The chart below, compiled by Bloomberg Intelligence economist Jamie Murray, illustrates the complexity of the analysis undertaken by central banks. Domestic inflationary pressures have not materialized as initially expected.

Interest rates could increase at a rate that is much faster than the market expects, NZIER principal economist Aaron Drew is warning.


Last week, the US Federal Reserve surprised financial markets by issuing a significantly more dovish-than-expected statement justifying its decision to keep its benchmark interest rate on hold.

“Monetary policy will ease in line with… inflation”, he added.

“The probability of a more extended breach than now forecast remains high”, he said. The deficit on the income balance is likely to stabilise, reflecting the effect of the decline in interest expenses in addition to a declining debt trajectory and rising profits of companies as economic growth continues.


The Sarb revised its growth forecast for 2015 downwards to 1.5%, Kganyago said, as contractions in mining and manufacturing, as well as low household and business expenditure, weigh on growth.

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