Hungary's central bank keeps key rate on hold, raises 2014 growth estimate to 3.3%

By bne IntelliNews September 24, 2014

The monetary council (MC) of Hungary's central bank decided on September 23 to keep the base rate at the record low of 2.10% for the second consecutive month after ending a 2-year long monetary easing cycle in July 2014, the bank said in a statement on its website. The move was expected by the market and is in line with the bank's guidance announced earlier. The bank will aim to keep rates unchanged for an extended period to support economic growth.

The central bankers agreed that the base rate has reached a level which ensures the medium-term achievement of price stability and a corresponding degree of support for the economy.

The MC members believe that the historically low inflation environment is determined by subdued inflation in external markets, the degree of unused capacity in the economy, subdued wage dynamics, lower inflation expectations and the cuts in regulated prices implemented in a series of steps. Domestic real economic and labour market factors will continue to have a disinflationary impact as well.

The rate setters agreed that Hungarian risk premia has remained broadly unchanged during the last quarter. The country' persistently high external financing capacity and the resulting decline in external debt have contributed to the reduction in its vulnerability. The council judged a cautious approach to policy should be warranted due to uncertainty about future developments in the global financial environment.

In its macroeconomic assessment, the bank noted that economic recovery has continued over the past quarter, with output rising across a wide range of sectors as employment continued to grow. Economic growth is expected to continue reflecting the pick-up in domestic demand. The gradual improvement in employment and rising household real income due to the low inflation are playing a key role in the recovery of household consumption, the bank said.

The bank raised its forecast for the average annual inflation in 2014 to 0.1% from 0% projected in June 2014. Inflation is expected to speed up to 2.5% in 2015, unchanged from previous projection. At the same time, the bank improved its 2014 GDP growth projection to 3.3%. According to the forecast, GDP growth will ease to 2.4% y/y next year. The bank will publish its detailed macroeconomic forecast in a couple of days.

Related Articles

Waberer’s finally set to deliver an IPO on Hungarian bourse

Hungarian trucking company Waberer’s International is preparing for an IPO on the Budapest Stock Exchange in July, according to media claims. If accurate, the reports will be hugely welcome in ... more

Hungarian PM's "proxy" moves into the nuclear industry as Paks tenders approach

Firms controlled by Hungarian oligarch Lorinc Meszaros have purchased a 51% stake in the Hungarian subsidiary of Czech nuclear ... more

RBI doubles net profit y/y in Q1 as Russian business recovers

Raiffeisen Bank International (RBI), the second largest bank operating across Central and Eastern Europe by assets, reported that net profit almost doubled year-on-year to €220mn in the first ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss