Hungary Monetary Policy


Central Bank cuts rates in July, signals slower-paced policy easing

At its 23 July monetary policy meeting, the Central Bank cut the base rate by 25 basis points from 4.25% to 4.00%, a move widely expected by the market. The decision marks the 12th consecutive rate cut, as authorities continue to attempt to boost the economy amid low inflation.

The Bank stated that it expects growth to resume by the end of the year, as Hungary's export market improves. Output continues to perform below potential and unemployment is still high due to structural factors.

The Monetary Council reckons that inflation has remained at particularly low levels as a result of pressures from weak domestic demand. Meanwhile, despite moderation in domestic risk indicators, the Bank noted that increased uncertainty in the global financial market continues to call for a cautious approach to policy. Given the state of the economy, both globally and nationally, the Bank justified the rate cut as necessary to ensure that its 3% inflation target is achieved.

The Bank stated that, "changing the pace or extent of policy easing," in the next months may be justified due to recent significant reductions in interest rates and the volatility of the financial markets.

FocusEconomics Consensus Forecast panellists see rates at 4.49% by the end of this year. For next year, the panel expects interest rates to be 4.67%.


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Hungary Monetary Policy Chart

Hungary Monetary Policy July 2013

Note: Central Bank base rate in %.
Source: Hungarian Central Bank (MNB).

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