Monetary policy in the first half of the year was characterized by the efforts directed at holding back the inflation and securing the country’s international stability. Favorable inflationary developments trend made it possible to slow down the forints devaluation, while the national bank decreased the central interest rate on several occasions. Monetary policy was determined not to let the real interest rate fall to a level where it would hold savings back and keep foreign investors away.
Last year’s trend of slowly decreasing lending rates continued. Average corporate lending rates (over one year) fell by 1.6 percentage point from the January 18.8 percent, while retail rates eased from 24.8 percent to 23.9 percent. Changes in the average cost of lending suggest that while retail and corporate lending rates decrease almost at the same pace over the long run, retail rates continue to be about 6 percentage points higher than corporate rates.
Long term changes in deposit rates also reveal a slow but even downward trend. Average corporate deposit rates (over one year) sank from 14.5 percent in January to 13.1 percent by June, while retail rates decreased by 1.2 percentage point from 13.8 percent. It is also part of this year’s developments that the difference between retail and corporate deposit interest rates is smaller than in case of lending rates; corporate deposit rates were on average 0.5 percentage points above retail rates this year.
Real deposit rates started to move away from the rather low level typical of 1997 in the first half of 1998. During the first six months the difference between the nominal commercial deposit rate and the 12 month consumer price index was 4 percent. The real interest rate in the retail sector came close to 3.5 percent in June. –
