(Bloomberg) — Hungary pressed ahead with its plan to unwind its emergency monetary regime, cutting the European Union’s highest key borrowing costs to ease pressure on the economy after three quarters of recession.
(Bloomberg) — Hungary pressed ahead with its plan to unwind its emergency monetary regime, cutting the European Union’s highest key borrowing costs to ease pressure on the economy after three quarters of recession.
The central bank cut its overnight rate by a percentage point to 15% on Tuesday, matching expectations of all economists surveyed by Bloomberg. Policymakers also held the benchmark rate, which was relegated to a secondary role last year, at 13%.
“The character of Hungary’s monetary policy won’t change after September,“ central bank Deputy Governor Barnabas Virag said at a news conference following the decision.
Rate setters are continuing their easing cycle, which started in May when they cut the peak rate from 18%, to bring the key and benchmark rates into alignment. If they carry on with the reductions as expected, it will effectively dismantle the emergency rate regime they introduced last October to halt a forint selloff.
Virag stressed policymakers intend to stick to a “gradual, cautious, and predictable” rate-cut path. He also ruled out steeper rate cuts, even if disinflation gathers pace.
The central bank’s third consecutive reduction will help relieve pressure on businesses and households, which have cut back on spending and exacerbated the economic downturn.
For the central bank, that outweighs the risk that rate cuts may halt the deceleration of the European Union’s highest inflation, which slowed to 20.1% in June, from a peak above 25% in January.
The forint, meanwhile, swung to a gain against the euro after the rate decision was published.
(Updates with comments from central bank deputy governor in third paragraph.)
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