Another Hungarian Central Bank Interest Rate Cut

December 18, 2012

Officials at the Magyar Nemzeti Bank cut the 2-week bill rate by 25 basis points for the fifth straight month.  The first of these moves in August to 6.75% was the first rate reduction since April 2010.  The rate level now becomes 5.75%, still 50 basis points above the Great recession trough.

A background statement issued in conjunction with today’s announcement paints a recessionary environment, concedes that inflation has been sticky, but predicts that it will “slow significantly in the short term, mainly reflecting movements in items excluded from the core measure.”  Considerable slack exists in Hungary’s economy, and officials are counting on such to neutralize identified medium-term inflationary risks.  As for possible future easing, “The Council will consider a further reduction in interest rates only if the improvement in financial market sentiment continues and incoming data confirm that the inflation target is achievable on the horizon relevant for monetary policy.”

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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