Hungary’s Central Bank Interest Rate Cut 15 Basis Points to 0.60%

July 21, 2020

Officials on the Monetary Council of Magyar Nemzeti Bank reduced the central bank base rate from 0.75% to 0.60%. The rate had been also cut by 15 basis points at the June policy review after having held at 0.90% since a reduction in May 2016. In a released statement, officials note that Hungary’s economy was performing well prior to the Covid-19 outbreak and that the comparatively brief lockdown had contained the first wave quite well, enabling economic activity to bottom by April. Macroeconomic projections were not modified further from those unveiled after the June meetings. Real GDP is seen expanding 0.3-2.0% this year, 3.8-5.1% in 2021 and 3.5-3.7% in 2022, and the forecast ranges for core CPI inflation are 3.3-3.5% this year and 2.6-2.7% next year. A statement released today observes that lowered central banks have had a greater impact on the short end of Hungary’s yield curve than longer maturities and hints that at 0.60%, the base rate may be close to an effective floor.

The Council continuously assesses incoming data and changes in the outlook for inflation. In the event of a persistent deterioration in the outlook for growth, the Bank will deliver the required additional economic stimulus using its targeted instruments, i.e. the Funding for Growth Scheme Go! and the Bond Funding for Growth Scheme, providing the most direct support to investment.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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