The Monetary Council of Hungary’s National Bank (MNB) lowered the two-week deposit rate to a record-low 1.95 percent from 2.1 percent today. The first cut since July is less than forecast as policy makers ended a seven-month pause in monetary easing after the biggest consumer-price drop since the 1960s, bloomberg.com reported. The Monetary Council also discussed on Tuesday the final version of the MNB’s fresh Inflation Report.
Although analysts had expected the Central Bank’s Monetary Council to reduce the key rate by 20 basis points to 1.90%, the Council decided to cut the rate only by 15 basis points to 1,95% on Tuesday. At the last policy meeting, on February 24, the Monetary Council acknowledged risks pointing in the direction of a lower base rate had increased, but agreed to decide on any possible rate change only after reviewing the central bank’s next Inflation Report. After a rate-setting meeting last July, the Council said it had wound up an easing cycle started almost two years earlier.
According to economic news portal portfolio.hu, MNB has just restarted the rate cut cycle it called off last summer, as its hands were practically forced by extremely low inflation. MNB expects the country’s annual average inflation to come in at 0% in 2015, the central bank’s latest prognoses published from the upcoming Report on Inflation showed on Tuesday. At the same time, MNB staff turned much more upbeat about growth and raised their 2015 GDP estimate to +3.2% from 2.3% in December 2014, portfolio.hu said.
via bloomberg.com and portfolio.hu photo: public domain