Hungary Central Bank Cuts Key Rate To 9.00%

(RTTNews) - Hungary's central bank lowered its benchmark interest rate further on Tuesday by accelerating the pace of easing in order to boost the economy, thanks to a stronger than expected disinflation process.

The Monetary Council of the Magyar Nemzeti Bank decided to cut the base rate by 100 basis points to 9.00 percent, in line with economists' expectations.

The rate was lowered for the fifth straight meeting, and the previous rate change was a 75 basis points reduction in the January meeting.

The rates on collateralized loan rates and overnight deposits were also cut by a full basis point to 10 percent and 8 percent, respectively.

The bank expects positive real interest rates will help to continue disinflation and achieve the inflation target.

"Risks surrounding global disinflation and volatility in international investor sentiment warrant a careful approach to monetary policy," the bank said.

Recent official data showed that the country's consumer price inflation eased to a near three-year low of 3.8 percent in January from 5.5 percent in December, bringing inflation within the bank's tolerance band.

The policy board observed that Hungarian economic performance stagnated in the fourth quarter of 2023 following the rebound in the previous quarter. 

As inflation moderates, real wages rise, and confidence gradually recovers, leading to a recovery in domestic demand, balanced economic growth is expected in 2024, the bank said in a statement.