Tuesday, August 26, 2014

Hungary maintains rate at 2.10 percent, as signaled

    Hungary's central bank held its base rate steady at 2.10 percent, living up to its word that it would freeze rates after 24 consecutive rate reductions.
    The National Bank of Hungary on July 22 cut its rate by 20 basis points, for a cumulative reduction of 490 points in its policy rate since August 2012, but added it was ending the two-year easing cycle as the rate had now reached a level that would ensure price stability and provide enough support for economic activity.
    At his press conference, central bank President Gyorgy Matolcsy then said the bank planned to maintain rates at that level until the end of 2015.
    In today's statement, the central bank did not make further comments.
    Last month the central bank said inflationary pressures were likely to remain moderate for an extended period and the negative output gap was expected to close gradually.
    Hungary's headline inflation rate rose to 0.1 percent in July after three months of deflation. In its June quarterly inflation report, the central bank lowered its forecast for inflation this year to an average of zero percent, sharply down from its March forecast of 0.7 percent.

    For 2015 the bank forecast inflation of 2.5 percent, with prices moving into line with the bank's 3.0 percent inflation target in the second half of the year.
    Hungary's Gross Domestic Product expanded by 0.8 percent in the second quarter from the first for annual growth of 3.9 percent, up from 3.5 percent in the first quarter.
   The bank has forecast growth this year of 2.9 percent and 2.5 percent in 2015, up from 1.1 percent in 2013.




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