Hungary's central bank cuts benchmark interest rate to 2.4%

Hungary's central bank trimmed the benchmark two-week deposit rate by 0.10 percent (10 basis points) at its monthly rate-evaluation meeting on Tuesday, marking the 22nd cut since August 2012 when the base rate stood at 7 percent. Given the flat inflation rate of minus 0.1 percent, analysts predicted the move despite faster-than-expected GDP growth of 3.5 percent in the first quarter of 2014. The bank issued a statement acknowledging a drop in unemployment, but said it was still too high. It also pointed to unused although improved manufacturing capacities, and to low inflation which it said it expected to continue. At the same time, it predicted continued GDP growth. It pointed out that Hungary's international risk assessment had improved and that the forint had managed to climb back up from recent lows. Despite expectations that prices would rise moderately as domestic demand increased, analysts said uncertainties of the global financial world drove a cut in the benchmark rate. The briefing said the bank would conduct a comprehensive analysis of macroeconomic prospects and risks before deciding whether to bring the rate down any further.