Magyar Nemzeti Bank

May 24, 2016

Hungary’s Base Rate was cut to 0.90% from 1.05% in a third consecutive reduction of 15 basis points.  The overnight lending rate also got sliced by 15 basis points, while the overnight deposit rate was retained at -0.05%.  More important, a statement from Hungary’s Monetary Council signaled an end to the latest string of base rate cuts, declaring “based on available information, the inflation outlook and the cyclical position of the real economy point to maintaining the 0.9 per cent base rate for an extended period.”  The prior month’s statement had said, “In the Council’s assessment, the sustainable achievement of the inflation target points to a further slight reduction in the policy rate.”  The statement expects a pause in growth, attested by last quarter’s 11-quarter low, to prove temporary.  There is still unused capacity that will keep inflation persistently below the 3% target until the first half of 2018.  Officials perceive a deterioration in global financial market sentiment.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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