BUDAPEST: Hungary’s central bank (MNB) cut its main interest rate to a record low level of 2.85 percent from three percent, yesterday.
The cut was the 18th in a row in an easing policy begun in August 2012 — when the rate was 7.0 percent — but was smaller than in previous months, a midpoint between analyst expectations of a 10 or 20 basis point cut.
The MNB was scheduled to explain its decision in a statement at 1400 GMT.
The central bank has said in recent months that Hungary’s low inflation and fragile recovery from a 2012 recession, as well as the continuing favourable global market sentiment, argued in favour of cutting the base rate to historically low levels.
Hungary — not a member of the eurozone — has recorded three quarters of growth in a row this year, after enduring its second recession in four years in 2012. Overall growth for 2013 was forecast at just one percent however, followed by two percent in 2014.
Twelve-month inflation, one of the highest in the EU in 2012, meanwhile dropped to a 40-year low of 0.4 percent since December.
After Tuesday’s announcement, the national currency — the forint — gained slightly, to 302.53 to the euro compared to 302.8 earlier.
The forint however has weakened below 300 to the euro since the start of the year, a factor in the MNB’s decision to slow the pace of the rate cuts on Tuesday.
Analysts says investors have been concerned over the relentless cuts as well as the impact on emerging economies such as Hungary of a potential slowing of stimulus from the US Federal Reserve.
AFP
