The level of decline is the first in almost three years.Continue reading
After the Hungarian Central Bank cut its one-day deposit rate by 100 basis points (1%) to 17% in May, it also flagged further possible “gradual” cuts as inflation slows, with markets expecting further easing on June 20, reported Reuters. “
Hopes were high among business and consumers regarding the June 20 Hungarian Central Bank rate decision meeting, where expectations are for another 100 basis points cut. The decision will reportedly have little to no effect on the Hungarian currency, forint.
However, the record high inflation currently near 24% is making the central bank’s board nervous, as lower interest rates would in theory mean more borrowers, that in turn could slow the fall of inflation under the one digit mark by the end of the year. The government’s current target is an inflation figure under 10% by December.
Food inflation and a record rise in the real value of salaries, the war in Ukraine and the subsequent sanctions, have all contributed to the general inflation in Hungary close to an astronomic 30% rate earlier this year, putting unprecedented burden on households. The MNB had reacted with raising interest rates to record levels, but these are causing their own difficulties, especially in the housing market. The current 17% base rate still translates to some 12-13% interest rate for car loans, and 9-10% rates for mortgages.
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