Hungary´s central bank cuts interest rates, as expected

Hungary´s currency strengthened following the central bank´s decision to cut interest rates, with analysts forecasting further reductions in the months ahead given the outlook for prices to remain in negative territory throughout much of 2016.

The National Bank of Hungary slashed its benchmark three-month deposit rate by 15 basis points to 1.05%, as expected by analysts, following a similar move at its previous meeting.

Its overnight lending rate was cut by another 15bp to 1.30% while the overnight deposit rte was kept at -0.05%.

Consumer price inflation fell to a -0.2% year-on-year pace in March and was likely to remain negative for much of the remainder of 2016, with upcoming cuts to the country´s value-added-tax set to keep prices below the monetary policy´s target in 2017 as well, analysts at Capital Economics said in a research note sent to clients.

As of 14:09 BST the US dollar was 0.27% down versus Hungary´s forint at 275.89, after having hit an intra-day high of 277.47.