Hungary's central bank cuts rates by less than expected
Hungary's central bank lowered its benchmark interest rate on Tuesday in response to recent weaker than expected readings on inflation.
The 15 basis point reduction in the two-week deposit rate was slightly less than the 20bp which analysts had been anticipating.
While there were likely to be further small reductions, Capital Economics pointed out how the monetary authority was likely still concerned by the possibility of triggering a sell-off in the country´s currency, the forint.
Furthermore, the economy ended last year with strong growth. The rate of growth in gross domestic product (GDP) came in at a “strong” 3.4% rate in year-on-year terms., the think-tank pointed out.
Hence, the current easing cycle was not expected to be particularly large.
“The big picture is that, irrespective of whether interest rates are lowered further or not, weak inflation will allow monetary policy to stay loose for the foreseeable future, said senior emerging markets economist William Jackson.