Hungary: Central Bank cuts rates further in March
March 26, 2013
At its 26 March monetary policy meeting, the Central Bank cut the base rate by 25 basis points to 5.00% in a move widely expected by the market. The reading marks the eighth consecutive rate cut as authorities continue to fight recession.
The decision reflects the Central Bank's view that the economy is still operating below its full capacity and that potential growth has slowed substantially, following a decline in investment activity and financial constraints. Furthermore, the Bank argues that recent market tensions have made Hungarian asset prices more volatile, warranting a more cautious approach to policy.
Regarding price developments, the Monetary Council sees inflationary pressures likely to remain moderate in the medium term, adding that incoming data on inflation show a downward trend led by subdued consumer demand. The Bank maintained a dovish stance, stating that it will consider cutting interest rates further if inflationary pressures remain moderate in the medium run and uncertainty regarding financial markets diminishes.
FocusEconomics Consensus Forecast panellists anticipate the Central Bank will cut interest rates further this year, resulting in a 4.98% year-end rate. For next year, the panel expects interest rates at 5.21%.