Tuesday, August 28, 2012

Hungary cuts interest rate 25 bps to 6.75%

    The National Bank of Hungary cut its central bank base rate by 25 basis points to 6.75 percent, a move that was not widely expected by economists due to a rise in inflation.
    The central bank did not immediately give any further details about its decision but announced the move in a statement.
    Hungary's economy slipped into recession this year, contracting by an annual 1.2 percent in the second quarter following a 0.7 percent contraction in the first quarter. The economy is first expected to expand in 2013.
    The Hungarian central bank raised its interest rates by 50 basis points in December 2011 to control inflation, which rose in July to an annual rate of 5.8 percent from June's 5.6 percent, sharply above the central bank's 3.0 percent target.
    Most economists had expected the bank to hold off on any rate cuts pending the result of financial aid talks with the International Monetary Fund and the European Union. But other economists had pointed to the shrinking economy as a reason the central bank should cut rates.


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