Forint getting weaker

At the end of April the Central Bank of Hungary (MNB) lowered the base rate to a record level: 2.5 percent. It seems that Hungary’s monetary policy uses the low base rate to motivate businesses and private individuals for taking out loans instead of depositing their money into bank accounts. Supporting export and increasing the level of foreign investment in Hungary can be done more efficiently with a weak forint, too. If we look beyond our borders, two big questions emerge: will Brussels turn off the money tap or will Moscow turn off the gas tap? Overseas the Fed announced that it would reduce its monthly budget for bond purchases to USD 45 billion, but the Americans keep smiling as the unemployment rate sank below the pre-recession level and internal consumption is speeding up the economy. Back to Hungary: the 2-percent interest rate on deposits hardly brings profit to forint deposit owners, but if they invest their money, the yield is low and the risk is high!