Hungary c-bank maintains monetary easing pace in October, in line with expectations.

By bne IntelliNews October 30, 2013

The monetary council of Hungary's central bank decided on October 29 to cut the base rate by 20bps to a new historic low of 3.40%, the bank said in a statement on its website. This was the fifteenth consecutive reduction, which was broadly expected by market analysts. The bank slowed the pace of the rate cutting cycle already in August, as it reduced the base rate by 25bps in each of the previous twelve months.

Hungarian economy is likely to expand gradually this year, followed by a further pick-up in growth next year. Considering that external economic activity is expected to strengthen and weak domestic demand conditions to persist, rate setters noted that inflationary pressures in the economy are likely to remain subdued in the medium term.

Weak domestic demand has already determined the low rate of underlying inflation since the beginning of 2013. Subdued wage dynamics suggest that companies are adjusting to higher production costs mainly through the labour market, and therefore the pass-through into consumer prices is likely to be moderate.

Although perceptions of the risks associated with the Hungarian economy have improved over the past month the central bankers noted that changes in sentiment in global financial markets continue to pose a risk, which in turn calls for maintaining a cautious approach to policy.

Related Articles

Finland gives final nod to construction of Nord Stream II

Finland has issued a second and final permit for the construction of the controversial Nord Stream II pipeline that is to pump gas from Russia directly to Germany via a Baltic Sea route, the Regional ... more

Lufthansa's arrival lifts economy of Hungary's second city

Three large German companies have chosen to invest in Debrecen, Hungary's second-largest city, since Lufthansa launched its first direct flight two years ago, it was announced on April 11.  ... ... more

Hungarian opposition parties bet on strong election turnout as cooperation talks stall

Green opposition party Politics Can Be Different (LMP) has suspended talks with fellow opposition parties after they failed to reach a cooperation agreement ahead of the April general election.  ... more