Base rate cuts depend on conditions

Interview

The Hungarian central bank (MNB) may continue to decrease the base rate if the quarterly inflation report that is to be published Aug 27 confirms the optimistic forecasts, member of MNB’s Monetary Council Péter Bihari said to Reuters.

If the coming reports show that the inflation target will be met in the next 6–8 quarters, the current trend of rate cuts can be continued. However, larger cuts are not possible because of the fragile international investment environment and the domestic risks. The prime rate was last time lowered by 25 base points to 7.75% in June. MNB is assessing the risks of increasing food prices; but these are likely to only have single, short-term effect. This way, VAT reduction of edibles suggested by Agriculture Minister József Gráf is not necessary; the transparency of the tax system is more important, Bihari added. (Napi Gazdaság, Gazdasági Rádió)

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