In a move to address the ongoing depreciation of the forint, Hungary's Monetary Council reduced the overnight deposit rate to 13% on Tuesday. This adjustment aligns the overnight deposit rate with the base rate, marking an end to an emergency monetary regime that had been in place.
As predicted by a Bloomberg survey, this decision establishes the base rate as the economy's effective key interest rate for the fifth month in a row. The alignment of these rates is part of Hungary's strategy to stabilize its currency amidst a persistent slump.
The reduction in the overnight deposit rate is seen as a significant step towards normalizing monetary policy in Hungary. The country has been grappling with economic challenges, as reflected in the continued depreciation of the forint.
The Monetary Council's decision to match the overnight deposit rate with the base rate is expected to provide a more stable environment for economic activities in Hungary. This move comes after months of maintaining an emergency monetary regime that was initially implemented to manage economic disruptions caused by unpredictable market conditions.
This decision marks a significant shift in Hungary's monetary policy and is expected to influence the trajectory of economic activities in the country moving forward. It remains to be seen how these changes will impact Hungary's broader financial landscape and whether they will successfully stabilize the forint over time.
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