Hungary: Central Bank reduces base rate
February 18, 2014
At its 18 February monetary policy meeting, the Central Bank decided to cut the base rate by 15 basis points from 2.85% to 2.70%. The decision undershot market expectations of a 20 basis points cut in the base rate. As a result, the interest rate now sits at the lowest level on record. This marks the nineteenth consecutive meeting in which the Bank decided to cut the base rate in order to boost the economy.
The Central Bank stated that economic activity is gaining momentum; however, output is still below potential. The labor market is showing sings of improvement; the unemployment rate is falling but remains above "the long-term level determined by structural factors." Regarding price developments, the Bank added that inflationary pressures are, "likely to remain subdued over the medium term."
FocusEconomics Consensus Forecast panelists see the base rate at 3.98% by the end of 2014. For 2015, the panel expects the base rate to be 3.98%.
Author: Dirina Mançellari, Senior Economist