Hungary: Central Bank cuts rates at a slower pace in August
August 27, 2013
At its 27 August monetary policy meeting, the Central Bank decided to cut the base rate by 20 basis points from 4.00% to 3.80%, reducing the pace of easing somewhat. The cut was slightly deeper than the market had expected. This marks the thirteenth consecutive rate cut as authorities continue their attempt to boost the economy amid a low inflation environment.
The Bank stated that, while output continues to perform below potential and unemployment is still high due to structural factors, it expects growth to pick up by the end of the year as demand from Hungary's exports improves. According to the Bank, improvements in domestic demand will be gradual, while external markets are showing signs of revival, mainly from developed economies.
The Monetary Council reckons that inflation has remained at particularly low levels as a result of downward pressures from weak domestic demand. In order to ensure that its 3% inflation target is achieved, the Bank decided to maintain an accommodative monetary policy stance.
Hungary was among the emerging economies that benefitted from developed economies' loose monetary policies. The country's assets attracted capital from investors looking for higher yields in the market.
FocusEconomics Consensus Forecast panellists 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%.