Magyar Nemzeti Bank

February 26, 2013

A seventh straight base rate reduction was approved in Hungary’s central bank in a split vote that put the outgoing governor in the minority camp.  At 5.25%, the base rate is back to its Great Recession low.  The first of this series of cuts was made in late August 2012, ending a span of seven months when the key interest rate had stood at 7.0%.  A statement released today left the door wide open for further monetary relief this year:

The Council will consider a further reduction in the policy rate if the medium-term outlook for inflation remains consistent with the Bank’s 3% target and the improvement in financial market sentiment is sustained.

The statement observed that Hungarian GDP contracted by more than anticipated last quarter and that total and core inflation have been lower than expected recently.  Officials stressed the disinflationary effects of weak demand and difficulty for companies to pass on any rise in costs to their customers.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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