Alexa
  • Directory of Taiwan

Hungary to have floating currency regime from Feb. 26, central bank says

Hungary to have floating currency regime from Feb. 26, central bank says

Hungary's currency, the forint, will be allowed to float freely against the euro from Tuesday, the central bank said Monday.
The National Bank of Hungary's surprise decision will eliminate the current exchange rate system, in which the forint was kept within a band of plus or minus 15 percent against the shared European currency.
The bank said the move was an important step in Hungary's aim to switch to the euro and provide more favorable conditions to get inflation under control. The current exhange rate system "does not contribute to anchoring long-term inflation expectations," the NBH said in a statement announcing the new system.
Analysts welcomed the move, saying it would help the central bank concentrate on its fight against rising inflation instead of also having to worry about the exchange rate band.
"The decision ends years of an inconsistent monetary regime of dual targets _ both FX and inflation _ that the (NBH) has never been happy about," said Lars Christensen, senior analyst at Danske Bank. FX means foreign exchange.
"This is clearly a wise and positive decision," he said.
While the Hungarian currency briefly strengthened to around 259 forints per euro in the wake of the annoucement, it later fell back to earlier levels near 262 to the euro.
"Obviously, by moving to the free float, the NBH will be given much more flexibility in terms of monetary policy, and will target inflation," said analyst Timothy Ash with Bear Stearns in London.
The central bank also said Monday that it was leaving its key interest rate _ the two-week deposit rate for commercial banks _ unchanged at an annual 7.50 percent.
The central back said its decision to introduce the new exchange rate system was made in agreement with Hungary's Socialist-led government.
Hungary has not set an official date for adopting the euro, but many analysts say 2014 is realistic.
Target dates announced earlier _ which considered introducing the euro even before 2010 _ were repeatedly scrapped as Hungary's economic performance and its macroeconomic indicators deteriorated.
To enter the so-called European Rate Mechanism II, the union's official two-year waiting room for euro hopefuls, a country must not exceed limits to its state budget deficit, inflation rate and debt level _ the Maastricht criteria.
While earlier the NBH forecast inflation to drop to an annual 3 percent by the second quarter of next year, it now sees that target as unattainable.
Its latest inflation report said an annual rate of 3.6 percent was expected in 2009. In January, Hungary's annual inflation rate stood at 7.1 percent.


Updated : 2021-05-11 07:13 GMT+08:00