Hungary: Central Bank cuts rates for the third time in a row
October 30, 2012
At its latest monetary policy meeting on 30 October, the Central Bank voted to cut the base rate by 25 basis points to 6.25% in a move expected by the market. The decision marked the third consecutive rate cut, as authorities move to rekindle faltering economic growth. The decision to further ease the reins followed on the deterioration of the Bank's growth outlook. In the same vein, the Bank noted that "the Hungarian economy has fallen into recession and growth is likely to resume next year as the country's export markets recover." Regarding price developments, the Monetary Council stated that "inflation is likely to stay significantly above the medium-term target this year and next." That said, the Bank expects inflation to ease amid the disinflationary impact of weak domestic demand as well as fading one-off price level shocks. Moreover, the Bank maintained a dovish tone and reiterated that it "will consider a further reduction in interest rates if the improvement in financial market sentiment persists and medium-term upside risks to inflation remain moderate".