Hungary’s central bank cut its key interest rate by a quarter of a percentage point to 6.75 percent. It announced this in a press release today. This is the tenth consecutive time the central bank has cut its base rate. However, analysts say there is little room for further monetary easing in the rest of this year.
Orbán’s influence
Hungary’s central bank is facing strong pressure to ease monetary policy from Prime Minister Viktor Orban’s government, Reuters reported. Commerzbank analyst Antje Praefcke said foreign exchange markets were concerned that the government would push for interest rate cuts in an effort to support the domestic economy. Nine of 17 economists polled by Reuters expected today’s cut in the key interest rate.
The annual rate of consumer price growth in Hungary slowed to 3.7 percent in June from four percent in May. Annual inflation thus returned to a decline after two consecutive months of growth.
Less room for further changes
However, analysts say that despite the June drop in inflation, there is limited room for further interest rate cuts. Analysts expect the base rate to be 6.5 percent at the end of the year. This would mean that the central bank will only cut the rate by a quarter of a percentage point in the rest of the year.
The Czech National Bank (CNB) cut the base rate by half a percentage point to 4.75 percent at the end of June. The CNB started cutting interest rates last December, when it cut the base rate by a quarter of a point to 6.75 per cent in the first step.
Source: Czech Press Office
