Hungary: Central Bank reduces base rate by 20 basis points
September 24, 2013
At its 24 September monetary policy meeting, the Central Bank announced that it will cut the base bank rate by 20 basis points, from 3.80% to 3.60%, a decision which was in line with market expectations. This is the fourteenth consecutive meeting in which the Bank has decided to reduce the base bank rate in order to stimulate the economy. Particular emphasis is being placed on reinforcing domestic demand, which is currently "below the productive capacity of the economy."
The Bank expects the economy to pick up in the coming quarters, with the external sector making a major contribution to acceleration. In addition, the current economic conditions - especially the low level of inflation - are expected to boost households' purchasing power.
Regarding price developments, the Monetary Council acknowledged that inflation remained at low levels due to, "subdued domestic demand, declining inflationary pressures in external markets and the gradual adjustment of inflationary expectations." The Bank expects inflation to reach the 3.0% target in the medium term.
FocusEconomics Consensus Forecast panelists see the base rate at 4.49% by the end of this year. For next year, the panel expects the rate to end the year at 4.67%.
Author: Dirina Mançellari, Senior Economist