Hungary’s turn to “forward guidance” less bold than at first sight

The National Bank of Hungary’s commitment to cut interest rates to a new record low of 3.0-3.5% over the coming months appears to be a bold step into the world of “forward guidance”. But the reality is more mundane. The “new framework” announced by Governor Matolcsy is less radical than it seems at first sight and, given Hungary’s large external financing requirement, there is a good chance that policymakers will struggle to cut interest rates as far as they hope.