UPDATE: Hungary Ctrl Bk Cuts Base Rate To 7.0% From 7.5%

(Adds analyst comment, detail.)

By Veronika Gulyas

Of DOW JONES NEWSWIRES

BUDAPEST (Dow Jones)--After cutting its key interest rate to a three-year low Monday, Hungary's central bank is expected to continue its easing policy cycle.

The country's economy is undergoing its deepest contraction for nearly two decades, while the outlook for inflation remains benign and the forint is relatively stable.

The National Bank of Hungary's monetary policy council lowered the base rate on two-week bills for commercial banks to 7.00% from 7.50%, in line with analysts' expectations.

The last time Hungary's base rate was this low was in July 2006.

Central bank Governor Andras Simor will discuss the decision at a 1300 GMT briefing.

The 16 private bank economists polled by Dow Jones Newswires before the decision unanimously expected the central bank to reduce the base rate by 50 basis points so as to take advantage of improved global risk appetite and help a recovery in gross domestic product, which the government expects to fall by 6.7% this year.

The central bank will publish the minutes of Monday's monetary policy council meeting Nov. 4.

Analysts expect Hungary to continue its easing cycle, with some forecasting that the key rate will be cut to as low as 5% next year.

"We believe (the central bank) will implement further cuts once headline inflation starts coming off sharply in the second quarter 2010," Barclays Capital Research economist Adarsh Sinha wrote in a note. "Our forecast for the final policy rate is 5%."

Due to its large external debt and loose fiscal policy in the past, Hungary was hit hard by the global financial market crisis, making it the first E.U. country to secure financial aid from the International Monetary Fund last year.

Nordea forecasts further rate cuts through 2009, with a low point of 6.0%, based on the minutes of the monetary policy council's previous, September meeting.

"The (monetary council) members unanimously agreed that it was both 'possible and necessary' to reduce the policy rate. Therefore, we still expect the policy rate to reach 6% within the next three months," Nordea analysts said. "Rates are expected to be cut by 50 basis points at a time."

 
   National Bank of Hungary Web site: www.mnb.hu 
 

-By Veronika Gulyas, Dow Jones Newswires; +361-267-0623; veronika.gulyas@dowjones.com

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=Ys6beN01yAdASZJc0To2fg%3D%3D. You can use this link on the day this article is published and the following day.

(END) Dow Jones Newswires

October 19, 2009 09:13 ET (13:13 GMT)


Copyright 2009 Dow Jones & Company, Inc.

The Dow Jones content is the property of Dow Jones or its licensors, and is protected by copyright and other intellectual property laws. If you are an individual, you agree not to store, copy, reproduce, modify, distribute, transmit, display, perform, publish, transfer, create derivative works from, broadcast or circulate any Dow Jones content to anyone, including but not limited to others in the same company or organization, without the express prior written consent of Dow Jones. If you are an entity, you agree not to permit access to the Dow Jones content by anyone other than an employee of you.

Notwithstanding the foregoing, the Dow Jones content may be copied and sent without charge in the ordinary course of business provided all copyright and other proprietary rights notices, the original source attribution, and the phrase "Used with permission from Dow Jones & Company” are included. Dow Jones content may only be used in this way for a non-commercial purpose, meaning such copying:
(i) is made on either an infrequent or irregular basis to a limited number of individuals;
(ii) is incidental to the purpose of your principal business;
(iii) cannot be used as a substitute for any Dow Jones content or any substantial part of it;
(iv) has no independent commercial value;
(v) is not separately charged for; and
(vi) is not made in connection with commercial information broking, information vending, publishing or credit rating, nor for substantial reproduction through the press or media, nor for transmission via any private or public network, cable or satellite system.

You may not post any Dow Jones content to forums, newsgroups, mail lists, electronic bulletin boards, or other services, without the prior written consent of Dow Jones. To request consent for this and other matters, you may contact Dow Jones at djnewswires@dowjones.com .

The Dow Jones content is not intended for trading purposes. The Dow Jones content is not appropriate for the purposes of making a decision to carry out a transaction or trade. Nor does it provide any form of advice (investment, tax, legal) amounting to investment advice, or make any recommendations regarding particular financial instruments, investments or products. Dow Jones may discontinue or change the Dow Jones content at any time, without notice.

The Dow Jones content includes facts, views, opinions and recommendations of individuals and organizations deemed of interest. Dow Jones does not guarantee or warrant the accuracy, completeness or timeliness of, or otherwise endorse, these views, opinions and recommendations.

DOW JONES IS NOT RESPONSIBLE FOR ANY DELAY IN YOUR RECEIPT OF THE DOW JONES CONTENT RESULTING FROM THE INHERENT LIMITATIONS OF INTERNET TRANSMISSION VIA THE WORLD WIDE WEB. DUE TO THE NUMBER OF SOURCES FROM WHICH THE DOW JONES CONTENT IS OBTAINED, AND THE INHERENT HAZARDS OF ELECTRONIC DISTRIBUTION, THERE MAY BE DELAYS, OMISSIONS OR INACCURACIES IN THE DOW JONES CONTENT. THE DOW JONES CONTENT IS PROVIDED “AS IS”, WITHOUT ANY WARRANTIES. DOW JONES AND ITS AFFILIATES, AGENTS AND LICENSORS CANNOT AND DO NOT WARRANT THE ACCURACY, COMPLETENESS, CURRENTNESS, TIMELINESS, NONINFRINGEMENT, TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE DOW JONES CONTENT, AND DOW JONES HEREBY DISCLAIMS ANY SUCH EXPRESS OR IMPLIED WARRANTIES. NEITHER DOW JONES NOR ANY OF ITS AFFILIATES, AGENTS OR LICENSORS SHALL BE LIABLE TO YOU OR ANYONE ELSE FOR ANY LOSS OR INJURY, OTHER THAN DEATH OR PERSONAL INJURY RESULTING DIRECTLY FROM USE OF THE DOW JONES CONTENT, CAUSED IN WHOLE OR PART BY ITS NEGLIGENCE OR CONTINGENCIES BEYOND ITS CONTROL IN PROCURING, COMPILING, INTERPRETING, REPORTING OR DELIVERING THE DOW JONES CONTENT. IN NO EVENT WILL DOW JONES, ITS AFFILIATES, AGENTS OR LICENSORS BE LIABLE TO YOU OR ANYONE ELSE FOR ANY DECISION MADE OR ACTION TAKEN BY YOU IN RELIANCE ON SUCH DOW JONES CONTENT. DOW JONES AND ITS AFFILIATES, AGENTS AND LICENSORS SHALL NOT BE LIABLE TO YOU OR ANYONE ELSE FOR ANY DAMAGES (INCLUDING, WITHOUT LIMITATION, CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT, OR SIMILAR DAMAGES), OTHER THAN DIRECT DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL THE LIABILITY OF DOW JONES, ITS AFFILIATES, AGENTS AND LICENSORS ARISING OUT OF ANY CLAIM RELATED TO THIS AGREEMENT EXCEED THE AGGREGATE AMOUNT PAID BY YOU FOR THE DOW JONES CONTENT IN THE 12 MONTHS IMMEDIATELY PRECEDING THE EVENT GIVING RISE TO SUCH CLAIM. BECAUSE SOME STATES OR JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR DAMAGES OR THE EXCLUSION OF CERTAIN TYPES OF WARRANTIES, PARTS OR ALL OF THE ABOVE LIMITATION MAY NOT APPLY TO YOU.

These Terms of Use, your rights and obligations, and all actions contemplated by these Terms of Use will be governed by the laws of England and Wales, and You and Dow Jones agree to submit to the exclusive jurisdiction of the English Courts.
If any provision in these Terms of Use is invalid or unenforceable under applicable law, the remaining provisions will continue in full force and effect, and the invalid or unenforceable provision will be deemed superseded by a valid, enforceable provision that most closely matches the intent of the original provision.