Hungarian Central Bank Rate Reduced 50 Basis points
September 28, 2009
The Magyar Nemzeti Bank lowered its two-week bill rate for banks to 7.5% from 8.0%. A 50-basis point cut had been anticipated and leaves the key rate at its lowest level since September 2007. The rate had previously been reduced by 50 bps on August 24, 100 bps on July 27, 50 bps on January 19, 50 bps last December 22, 50 bps on December 8, and 50 bps on November 20. A 300-bp increase was implemented last October 22 to support the forint. The rate is now a percentage point lower than its level prior to the mega-increase last October. A statement released by officials observed that much of Hungary’s VAT increase had not been passed on to consumers. The CPI went up 5.0% in the year to August, while GDP fell 8.1% at an annualized rate and 7.6% from a year earlier in 2Q09. Industrial production, down 19.4% in the year to July, and joblessness of 9.7% that same month also reflect the severity of Hungary’s recession. Officials expect positive growth in domestic demand to resume by mid-2010. The forint is about 11% weaker against the dollar than a year ago.
Copyright Larry Greenberg 2009. All rights reserved. No secondary distribution without express permission.
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