Hungary elects to reduce central bank base rate by 25 bps to 5¾%

By Richard Connell

New York, Feb. 22 - The Monetary Council of the Magyar Nemzeti Bank reduced its central bank base rate by 25 basis points to an all-time low of 5¾% at its meeting on Monday, according to a news release issued by the bank.

The council of the Hungarian central bank noted that inflation remains elevated due to temporary increases in taxes and administered prices, but the council forecast that it would fall significantly in the second half of 2010 and drop below the inflation target of 3% in 2011.

The council pointed out that the GDP continued to fall in fourth-quarter 2009 but noted that the pace of decline moderated, led by an increase in exports, and looking forward the council anticipates economic growth to resume by the middle of 2010.

While pointing out that the room to maneuver regarding interest rate policy has narrowed, the council reduced the interest rate by 25 bps in order to reduce the country's vulnerability to external shocks.

The council has now cut the rate at 13 straight meetings by a total of 575 bps.

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