Hungary: Central Bank leaves rates unchanged
July 26, 2011
At its latest monetary policy meeting on 26 July, the Central Bank left the benchmark rate unchanged at 6.00%, in a decision that was widely expected by the market. Monetary authorities last raised interest rates in January. The Central Bank anticipates a protracted recovery over the next two years, buttressed in the short run by strong external demand, while domestic demand is likely to gradually gather momentum. In the context of subdued domestic demand, the Bank believes ?inflation may fall back to 3% by the end of 2012 even without policy tightening, despite the cost shocks hitting the economy.? Moreover, considering the dependence on the external sector, the Bank highlighted that a ?deepening of the [sovereign debt] crisis could cause a slowdown in Euro area activity, which would negatively affect the outlook for Hungarian economic growth through lower external demand.?