Hungary: Central Bank slashes rates again
January 29, 2013
At its 29 January monetary policy meeting, the Central Bank voted to cut the base rate by 25 basis points to 5.50%, in a move expected by the market. The decision marked the sixth consecutive rate cut, as authorities continue to attempt to rekindle faltering economic growth.
The decision reflected the Central Bank's view that weaker domestic demand will have a further disinflationary effect on the economy. The Bank also noted that economic growth is likely to resume this year amid improvements in the external sector, while domestic demand will remain weak, as investment deteriorates and high unemployment drags on consumption.
The Monetary Council expects inflation to gradually return to the 3.0% inflation target as one-off price level shocks dissipate. That said, the Council noted that inflation closed 2012 above its target, as government measures, such as the VAT increase early in the year, resulted in a significant price increase.