MNB cuts key rate by another 15 bp, down to 2.85%

Tourism

The Monetary Council of the National Bank of Hungary (MNB) decided to reduce the central bank’s key rate by 15 bp to 2.85% at its meeting on Tuesday, in line with general expectations. Analysts had expected rate-setters to slow the easing cycle, estimating a cut of 10-15 bp.

 The Council reduced the base rate by 25 bp at each of its monthly rate-setting meetings for twelve months from August 2012 until last August, when it started making 20 bp cuts.

In a statement published after the meeting, the Council acknowledged the effect of government mandated cuts to utilities prices on slowing inflation, but said inflationary pressures in the economy was “likely to remain subdued over the medium term,” noting the negative output gap, weak domestic demand and low inflation on external markets. The Council said economic growth was “expected to continue” in the coming quarters, supported by domestic demand as well as higher exports.

While corporate investment is set to rise because of the MNB’s Funding for Growth scheme and European Union-funded government infrastructure projects, the recovery in household consumption “is likely to be gradual.”

Achieving the MNB’s 3% mid-term inflation target “points in the direction of monetary easing,” the Council said. But it added that a “sustained and marked” shift in risk perceptions associated with Hungary’s economy could influence the room for monetary policy manoeuvre.

“Considering the outlook for inflation and taking into account perceptions of the risks associated with the economy as well as the improvement in the pace of economic growth, further cautious easing of monetary policy may follow, but a reduction in the increment has become warranted,” the Council said.

The condensed minutes of the meeting on Tuesday will be published on February 5.

ADVERTISEMENT

Climate change hurts economy, but creates new business oppor... Analysis

Climate change hurts economy, but creates new business oppor...

Lawmakers approve 2022 budget Parliament

Lawmakers approve 2022 budget

Dentons rehires banking and finance partner Appointments

Dentons rehires banking and finance partner

Budapest launches revamped coupon card for visitors City

Budapest launches revamped coupon card for visitors

SUPPORT THE BUDAPEST BUSINESS JOURNAL

Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.