Published: November 23 2023
The Central Bank of Hungary has announced its plans to continue cutting interest rates in an effort to reach a base rate of under 11% by the end of the year. This decision is driven by considerations of global disinflation and volatility in international investor sentiment, as well as strong disinflation and stability in financial markets.
Key Points of the Rate Cut Decision
- The central bank plans to lower the symmetric interest rate corridor, bringing the overnight deposit rate to 10.50% and the overnight collateralized loan rate to 12.50%.
- The decision to cut rates was made based on strong disinflation and stability in financial markets, but a cautious approach is still warranted due to external risks.
- The domestic real interest rate has risen further due to accelerating disinflation, supporting the decline in overall inflation.
- The central bank predicts that the base rate could fall under 11% by the end of the year and could reach single digits by February 2024.
- Inflation is expected to be around 7% at year-end, with short-term repricing patterns similar to those seen before 2020.
Implications for the Macroeconomic Outlook
The continued rate cuts and the decline in inflation contribute to a positive macroeconomic outlook for Hungary. With the base rate expected to decrease and inflation projected to be around 7%, the central bank's measures aim to promote economic growth and stability in the country.
Conclusion
The Central Bank of Hungary's decision to continue cutting interest rates reflects its cautious approach to monetary policy in light of global disinflation and volatility in international investor sentiment. These measures aim to support economic growth and stability in Hungary, with the goal of reaching a base rate of under 11% by the end of the year.
Questions & Answers
What is the current base rate in Hungary? The current base rate in Hungary is not specified in the source article.
What is the O/N deposit rate in Hungary? The O/N deposit rate in Hungary is 10.50%.
What is the O/N collateralised loan rate in Hungary? The O/N collateralised loan rate in Hungary is 12.50%.
Why did Hungary's Central Bank continue to cut rates? Hungary's Central Bank continued to cut rates due to strong disinflation and the stability of financial markets.
What is the outlook for inflation in Hungary? The outlook for inflation in Hungary is expected to be around 7% by year-end, according to central bank deputy governor Barnabás Virág.
When is the base rate in Hungary expected to fall under 11%? The base rate in Hungary is expected to fall under 11% by year-end, according to central bank deputy governor Barnabás Virág.
When is the base rate in Hungary expected to reach single digits? The base rate in Hungary is expected to reach single digits by February 2024, according to central bank deputy governor Barnabás Virág.
