Tuesday, October 29, 2013

Hungary cuts rate by 20 bps to 3.40%, 15th cut in a row

    Hungary's central bank trimmed its base rate by a further 20 basis points to 3.40 percent, its 15th rate cut in a row, but did not immediately issue a statement explaining its decision.
    The National Bank of Hungary, which has cut rates by 235 basis points so far this year, said last month that it may cut rates further due to muted inflation pressures and spare capacity in the economy.
    Economists had widely expected the central bank to continue its easing cycle, which began in August 2012 to counter slowing growth. Since then it has cut rates by 360 basis points.
    Earlier this week a Reuters poll showed that economists expect the central bank to continue cutting its policy rate until it reaches 3.0 percent, down from a previous forecast of 3.5 percent from August, due to the likelihood that the U.S. Federal Reserve will continue to purchase assets.
    But there are growing signs that the central bank is getting closer to pausing its rate cuts, with a member of bank's rate panel telling the Wall Street Journal earlier this month that the bank has to tread with caution with further cuts to prevent a possible sell-off of Hungarian assets.

    Hungary's inflation rate rose to 1.4 percent in September from 1.3 percent in August, still well below the central bank's 3.0 percent medium-term target.
    Hungary's Gross Domestic Product rose by 0.1 percent in the second quarter from the first, for annual growth of 0.5 percent, the first annual expansion since the fourth quarter of 2011, confirming the bank's expectation that growth will gradually pick up on better automobile exports and some improvement in domestic demand.



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