Hungary Monetary Policy


Hungary: Central Bank cuts rates for ninth month in a row

April 23, 2013

At its 23 April monetary policy meeting, the Central Bank cut the base rate by 25 basis points to 4.75% in a move widely expected by the market. The decision marks the ninth consecutive rate cut as authorities continue to attempt to boost the economy amid low inflation.

The Bank affirmed that the economy is still operating below its full capacity and that unemployment is above its long-term trend due to structural factors. Furthermore, monetary authorities argued that the risk premium on Hungarian assets has reduced, indicating an improvement in global financial markets. Nevertheless, the current weak economic activity still warrants a cautious approach to policy.

Regarding price developments, the Monetary Council believes that weak demand will keep on exerting a strong downward pressure on prices and that the impact of fiscal measures, which led to a higher tax burden in some sectors, will be slow to feed through to consumers. 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 inflation is in line with its +/-1 3% inflation target.

FocusEconomics Consensus Forecast panellists anticipate the Central Bank will cut interest rates further this year, resulting in a 4.49% year-end rate. For next year, the panel expects interest rates at 4.67%.


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Hungary Monetary Policy Chart

Hungary Monetary Policy April 2013

Note: Central Bank base rate in %.
Source: Hungarian Central Bank (MNB).

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