Hungarian central bank cuts interest rates

The Hungarian central bank has reduced what was the European Union’s highest benchmark interest rate fir the second time in a fortnight in order to fight off the stranglehold the downturn has on the economy as it heads for recession.

The two-week deposit rate has been cut to 10 percent from 10.5 percent which is what economists had widely predicted.

In order to keep the value of the forint, Hungary has increased interest rates had been increased by 3 percent so that foreign investors would not pull their money out of the country.

In the last meeting the MPC announced a larger cut in interest rates, although from past experience the Hungarian MPC is rarely following the strategy of equal steps, although signals have been made that rate cuts are likely to follow in 0.5 percent steps.

Cuts are currently being forecast although the aggression of those cuts do depend on a positive outlook in regards to inflation and growth as well as prevailing market conditions.

Currently, inflationary fears have eased drastically and it is hoped that inflation will fall below the 3 percent target rate, although the National Bank of Hungary are still concerned with the lack of financial stability and so are naturally cautious.

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