The impact of the easing cycle on the Hungarian macroeconomy and financial markets

This paper examines the easing cycle initiated by the Magyar Nemzeti Bank in August 2012 and its macroeconomic and financial market impacts. It first presents the operation of the transmission mechanism under normal economic conditions and then addresses the main challenges of the post-crisis period. It gives an overview of the impact of the interest rate cycle on various financial markets and the macroeconomy. The paper concludes that based on the estimates provided by the Magyar Nemzeti Bank’s forecasting model, the easing cycle has decreased the rate of the undershooting of the central bank inflation target and significantly contributed to increasing the level of economic output.