Hungary sees inflation falling below target, cuts interest rate: minutes report

By Richard Connell

New York, Dec. 9 - The Monetary Council of the Magyar Nemzeti Bank, forecasting inflation falling below the inflation target due to continued subdued demand, cut its central bank base rate by 50 basis points to 6½% at its meeting on Nov. 23, according to minutes released by the bank.

The council noted that CPI inflation in Hungary was 4.7% in October, while core inflation was 4.9%, both measures having fallen by 0.2% from the previous month.

The council also looked at data which showed that the GDP fell by 7.2% in Q3 2009 relative to the same period of the year before, marking the sixth straight quarter showing a decline in the economy.

Looking forward, the council forecast that the outlook for the economy had dimmed somewhat, based on the data regarding GDP and unemployment.

On a positive note, the council did point out that perceptions regarding risks associated with the Hungarian economy had improved over the past months.

The council deemed that the risk of undershooting the inflation target of 3% had increased so as to warrant a further cut in the base rate to 6½%.

The council has now reduced the rate at five straight meetings by a total of 300 bps.

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