As an unexpected Christmas gift, the forint depreciated against the euro by 370 on Thursday afternoon and has maintained that level ever since, despite a series of central bank efforts to stem the exchange rate’s depreciation.
There was an unprecedented weakness in the forint exchange rate, with the local currency weakening again to 370 HUF on Thursday, setting another record negative on the exchange rate curve. The weakness of the forint is also remarkable because MNB is trying to stop the exchange rate depreciation with a series of measures, but so far without success.
MNB started raising interest rates in the middle of the year, hoping that would stop the money deterioration. He then separated the base rate from the one-week deposit rate. The central bank has raised both steadily, with the benchmark interest rate multiplied by 30 basis points and the deposit rate by up to 2%. The positive effect of the measures on the exchange rate is not felt.
Although there was no direct connection, the fact that Viktor Orban announced after Thursday’s cabinet meeting that retail mortgage rates would be set at the end of October did not help restore international confidence in the local currency. The measure will enter into force at the beginning of January and will continue until the end of June, that is, until the end of the epidemiological emergency. All this means that February’s premium will be lower than before. In six months and about half a million loans, the interest rate hike will mean a total of thirty billion subsidies and the same amount of losses for the banking sector.
(Cover Image: Body Janos/Index)
