Hungary’s central bank cut its key interest rate by a full percentage point for a fifth month, ending an emergency monetary regime imposed last year to arrest a slump in the forint.
The Monetary Council lowered the overnight deposit rate to 13% on Tuesday, matching the forecast of all economists in a Bloomberg survey. That’s on par with the level of the base rate, which is expected to resume being the effective key interest rate for the economy.
“If the central bank wants to take back control from the market over rate expectations, it has to engineer a hawkish surprise in October,” Peter Virovacz, an economist at ING Bank Hungary, said by phone before the rate decision. He expects policymakers to slow the pace of rate cuts to 25 basis points a month in October and November.
Hungary’s government and central bank have clashed repeatedly over economic and monetary policy in the past week as each side seeks to blame the other for a yearlong recession and to take credit for disinflation.
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