Hungarian Benchmark Rate Sliced to 8.0% From 8.5%

August 24, 2009

The Magyar Nemzeti Bank two-week bill rate was reduced to a 16-month low of 8.0% as expected.  This benchmark policy rate has dropped 350 basis points since its peak of 11.5% from last October 22nd through November 20th.  Four 50-bp cuts were implemented by January 19.  After a half-year pause, there was a 100-bp reduction on July 27, and today’s move reverted to the 50-bp size.  A statement from central bank officials indicated that more monetary easing is probable because inflation, although now above the 3.0% target, is likely to slide below that level in the medium term.  Like much of Eastern Europe, Hungary has been in a severe recession.  Real GDP fell 8.1% at an annualized rate last quarter and by 7.6% between 2Q08 and 2Q09.  Industrial production in June was 18.6% less than a year earlier, and the jobless rate was at 9.6%.  Hungary has sizable twin deficits of about 3% of GDP on the current account and around 4% of GDP on public finances, but the forint has substantial trimmed last year’s massive loss.  Consumer price inflation is currently at 5.1%.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.


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