Hungary central bank cuts rates further to 6.50%

Interview

The National Bank of Hungary's Monetary Council decided on Tuesday to cut the central bank's key rate by 25bp to 6.50%.

The move came as little surprise to analysts who thought it likely the Council's external members would again outvote the MNB governor and his deputies as they did at the previous meeting in August.

Speaking at a press conference after the meeting, MNB governor András Simor said a proposal to keep the base rate on hold was made in addition to the one to cut the rate by 25bp. The latter proposal was supported by a "narrow majority", he added.

At the Council's rate-setting meeting in August, Simor and his two deputies voted to keep the base rate on hold at 7.00%, but the body's four external members voted to cut the rate by 25bp to 6.75%. The decision was the first to change the rate since December 2011.

"The majority view of the Council was that it was time to act in the interests of growth," according to the minutes from the meeting.

In an interview published the following day, Simor said looser monetary policy could hardly improve the outlook for growth in Hungary.

"There is a stereotype that a low interest rate is good and a high interest rate is bad, which is a very simplified picture of the world. Here and now in Hungary, a rate cut can hardly improve the outlook for growth," Simor said in the interview.

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