Hungary Rate Cuts Won’t Stimulate Economy, Simor Says

Hungary’s central bank can’t provide strong economic stimulus by cutting interest rates as a weaker forint hurts households saddled with foreign-currency debt, said Andras Simor, the bank’s president.

The Magyar Nemzeti Bank’s primary responsibility is to achieve and maintain price stability, Simor wrote in an article for the Budapest-based weekly newspaper HVG published today. While the central bank should also try to support the growth and stability of the economy, monetary policy is constrained by above-target inflation and the foreign-currency debt of households, Simor said.

The bank last week cut its main rate 25 basis points to 6.25 percent, a third consecutive reduction. Hungary’s improved risk assessment and the 3 percent inflation target remaining within reach by 2014 provide room for further easing, central bankers Andrea Bartfai-Mager, Ferenc Gerhardt and Gyorgy Kocziszky said in an interview on Nov. 5.

To contact the reporter on this story: Andras Gergely in Budapest at agergely@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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