Central Bank of Hungary

May 27, 2014

Monetary officials engineered a 22nd straight monthly cut of their benchmark interest rate, a 10 basis point reduction as was expected.  This was the third 10-bp cut, following two 15-bp reductions, 5 straight 20-bp cuts and a dozen 25-bps cuts.  Prior to August 2012, the key interest rate was at 7.0%, and now it is at a record low of 2.4%.  On-year inflation of minus 0.1% is negative for the first time in 46 years versus a target of 3%.  Core inflation is somewhat higher, however, and Hungary’s output gap is diminishing.  The dollar was left open for more cuts in today’s released statement:

Achieving price stability in the medium term points in the direction of monetary easing. The improvement in perceptions of the risks associated with the economy provided scope for a further cautious reduction in interest rates. The Monetary Council will decide on the need and possibility of reducing the base rate further after a comprehensive assessment of the macroeconomic outlook and developments in perceptions of the risks about the economy and in view of the baseline projection and alternative scenarios in the June issue of the Quarterly Report on Inflation.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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