Published: December 07 2023
The Hungarian National Bank (MNB) has made the decision to lower interest rates in order to boost the country's economy. This move comes as a result of strong disinflation and a reduction in vulnerability, according to the Monetary Council of the MNB.
Key Points from the Monetary Council's Decision
- Interest Rates: The base rate has been cut by 75 basis points, bringing it down to 11.50 percent. The interest rate corridor boundaries have also been lowered by the same amount.
- Economic Outlook: Despite a 0.4 percent year-on-year contraction in the third quarter of 2023, economic output has increased by 0.9 percent quarter-on-quarter. The country's external balance position is significantly improving and the current account deficit is projected to narrow to below 1 percent of GDP.
- Inflation: Policymakers expect inflation and core inflation to continue declining. It is anticipated that inflation in December could be around 7 percent, and disinflation is expected to continue into 2024.
These measures aim to support the Hungarian economy by stimulating growth and reducing inflationary pressures.
Questions & Answers
What did the Hungarian National Bank (MNB) decide at its November meeting? At its November meeting, the MNB decided to cut the base rate by 75 basis points and lower the boundaries of the interest rate corridor by 75 basis points.
What is the new base rate in Hungary? The new base rate in Hungary is 11.50 percent.
Why did the Monetary Council decide to cut the base rate? The Monetary Council members were unanimous in their view that strong disinflation and a reduction in the country's vulnerability would allow for a cut in the base rate.
How is the Hungarian economy performing in the third quarter of 2023? In the third quarter of 2023, the gross domestic product contracted by 0.4 percent year-on-year, but economic output increased by 0.9 percent quarter-on-quarter.
What improvement is the country's external balance position showing? The country's external balance position is showing a rapid and significant improvement, and the current account deficit is projected to narrow to below 1 percent of GDP in 2023.
What is the outlook for inflation in Hungary? According to several policymakers, domestic inflation remains broadly unchanged, with a significant decline. It is expected that inflation in December could already be around 7 percent, and disinflation should continue into 2024.
