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Hungary cbanker says no swift reopening expected from lockdown

03/24/2021 | 12:54pm EDT

* Partial reopening likely in second half of 2021

* Bank left key rates steady on Tuesday, as expected

* New statement signals readiness to act on CPI, if needed

* No systemic risk to banks after loan moratorium expires

BUDAPEST, March 24 (Reuters) - Hungary is unlikely to quickly reopen its economy from current pandemic-induced lockdowns, despite relatively high vaccination levels, central bank rate setter Gyula Pleschinger said on Wednesday.

Hungary's hospitals are under "extraordinary" pressure from rising coronavirus infections, the surgeon general has said, as the country becomes a hotspot in the third wave of a pandemic that has hit Central Europe especially hard.

"We are faring rather well in terms of inoculations compared to Europe. However, not so well overall," Pleschinger said.

The National Bank of Hungary (NBH) left interest rates unchanged on Tuesday, as expected, and said it was ready to prevent a sustained rise in inflation as the economy starts to recover from the coronavirus shock.

The bank expects inflation to approach 5% in the second quarter because of rising fuel prices and tax changes - overshooting its 2% to 4% target range - but sees inflation then returning to its target band.

Pleschinger said the bank purposely omitted a reference from its Tuesday policy statement that it considered prevailing interest rate conditions fully in line with its objectives and there was no need to change them.

"Now we have omitted that and signalled that we are following market developments very closely and will act if sustained upside inflation risks materialise," he said.

Pleschinger added, however, that the bank would only act if its preferred measure of lasting price trends, tax-adjusted core inflation, moved out of its target band for a sustained period.

"As long as tax-adjusted core inflation remains inside the tolerance band ... we will not act," he said.

Should any change in rates be necessary, the first move would not affect the base rate but other tools, such as the interest rate corridor or targeted instruments, Pleschinger said, without elaborating.

Pleschinger declined to comment on current exchange rates, but said the weakening of the forint over the past years had been in line with the central bank's interest rate policy and its goal to steer inflation towards its 3% target. (Reporting by Gergely Szakacs; Editing by Alex Richardson and Nick Macfie)

© Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
EURO / HUNGARIAN FORINT (EUR/HUF) 0.75% 360.19 Delayed Quote.-0.79%
US DOLLAR / HUNGARIAN FORINT (USD/HUF) 0.73% 305.99 Delayed Quote.2.73%
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