Tuesday, March 26, 2013

Hungary to mull further rate cuts if inflation moderate

    Hungary's central bank, which earlier today cut its base rate for the eight time as expected, said it would consider cutting rates further as long as "medium-term inflationary pressures remain moderate and the uncertainty surrounding financial market developments diminishes."
    The policy guidance by The National Bank of Hungary is similar to its stance in recent months, signaling it is likely to continue its easing cycle that was begun in August 2012. Since then, the central bank has cut rates by 200 basis points and this year rates have been cut by 75 basis points.
    The central bank said there is still a significant degree of spare capacity in Hungary's economy and "inflationary pressure is likely to remain moderate in the medium term, and therefore the 3 percent target can be met with looser monetary conditions."
    It said that recent fluctuations in Hungarian asset prices could not be "justified by fundamental forces" and this warranted a cautious approach to policy.
    In its latest inflation report, the central bank estimated consumer price inflation of 2.6 percent in 2013, down from 2012's 5.7 percent and 2.8 percent in 2014. The central bank targets inflation of 3.0 percent.
    Hungary's inflation rate eased to 2.8 percent in February from 3.7 percent in January.
    Hungary's Gross Domestic Product contracted by 0.9 percent in the fourth quarter, it's fourth quarterly contraction in a row, for an annual shrinkage of 2.7 percent.
    The central bank forecast growth of 0.5 percent in 2013, up from 2012's 1.7 percent contraction, and expansion of 1.7 percent in 2014.


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