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Monetary Council cuts key rate by 50 bp

The Hungarian Central Bank (MNB) Monetary Council decided to cut the key rate by 50 basis points (bp) to 11.00% at a rate-setting meeting on Monday.

The meeting was the first rate-setting meeting since the council raised the base rate a sharp 300 bp in a unanimous decision at an extraordinary meeting on October 22, just two days after deciding to leave rates on hold at a scheduled meeting.

MNB governor András Simor said the Council raised the base rate 300 bp to make an attack on the forint costlier for speculative investors. The forint had weakened sharply from 263 to 283 against the euro in the days following the October 20 meeting.

A significant majority of the council voted at to cut the key-interest by 50 basis points, Simor said.

Monetary council members were also given the option of voting to keep the key-rate on hold and to cut it by 100 basis points, Simor said.

“A rate cut of more than 50 basis points would have entailed significant economic risks within the circumstances that currently prevail in the financial system and Hungary's economy,” Simor added.

In response to a question, Simor declined to comment with regard to opposition-party Fidesz Chairman Viktor Orbán's proposal that the MNB reduce the key-interest rate to 6.0%, adding that that the central bank does not react to political statements. (MTI – Econews)