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Central bank lowers base rate beyond expectations

The Monetary Council of the Hungarian National Bank (MNB) cut its benchmark interest rate by 75 basis points to 8.25% today. This has been the ninth rate cut since the downward trend began in March 2003. The decision surprised most analysts, as the market consensus was a 50 basis point rate cut. The four new nominees to the council delegated by Prime Minister Ferenc Gyurcsány, who have a reputation as supporters of a more lenient interest rate policy, were not present at the meeting. Speaking at a press conference after the announcement, MNB President Zsigmond Járai said the higher-than-expected cut was made possible by the good December and January inflation reports, adding that this is not to say cuts will continue at this rate in the future. A month ago, Gyurcsány expressed an opinion that lowering the benchmark interest rate to 8% would still ensure a neat income for foreign investors, with several analysts concurring in the view that MNB will cut the rate to % by the end of H1.