Hungary’s National Bank has radically reorganised its monetary policy framework over the past couple of years, in the process moving away from interest rate cuts and turning to increasingly unorthodox tools to loosen policy. However, these measures have been less effective in loosening monetary conditions than reductions in the benchmark interest rate. The upshot is that if the MPC wants to ease monetary policy and thus raise inflation (as it has suggested), it would be better of sticking to conventional rate cuts.
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