Hungary: Central Bank lowers policy rate to rekindle economic growth
November 27, 2012
At its latest monetary policy meeting on 27 November, the Central Bank voted to cut the base rate by 25 basis points to 6.00% in a move expected by the market. The decision marked the fourth consecutive rate cut, as authorities move to rekindle faltering economic growth. The decision to further ease the reins followed on the Central Bank's gloomy growth outlook. The Bank noted that the Hungarian economy remains in recession, and that external as well as domestic factors point to weak growth in the coming year. Regarding price developments, the Monetary Council reiterated 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".