Forint Strengthens As Hungary Welcomes ECB Announcement

  • 28 Jan 2015 8:00 AM
Forint Strengthens As Hungary Welcomes ECB Announcement
Hungary’s forint got a boost from a falling euro against the dollar after the European Cental Bank (ECB) announced an extended asset purchase programme comprising sovereign euro area debt. Forint is now trading at 311,5 to the euro on the interbank forex market, up from 315.31 late Wednesday. Forint hit an all-time low at 327.62 last Thursday. Hungary’s Economy Ministry also welcomed the announcement made by the European Central Bank on buying up 6 billion euros in bonds and other assets every month to encourage economic growth.

The Ministry noted the programme would remain in place until the end of 2016, considering that it is planned to last until inflation rises to 2%, the level considered as price stability. While the ECB will exclusively buy euro-zone bonds under the programme, the additional liquidity appearing on these markets could reduce the yields of non-euro-zone countries such as Hungary, too. This will leave more funds for economic development and job creation, the Ministry said.

The Economy Ministry also said that Hungary’s cash-flow-based budget deficit, excluding local councils, had come to 825.7 billion forints (EUR 2.6bn) in 2014, or 71.7% of the full-year target, confirming the preliminary estimate. The Hungarian Parliament amended the 2014 deficit target upward to 1,151.5 billion forints in December.

The ministry said the fresh data confirm the government’s expectations, according to which the deficit as a percentage of GDP, calculated under the European Union rules, could be smaller than the 2.9% target.


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