Hungary lowers interest rates amid moves to boost economy

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Hungary lowers interest rates amid moves to boost economy

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Hungary’s central bank has lowered its main interest rate from two and a half to two point four percent.

It also left the door open to further moves to help boost the economy.

With annual inflation there falling after the government imposed energy price cuts and local financial markets buoyed by a continued inflow of capital, the bank sees room for further rates cuts.

It was the twenty second successive monthly reduction with the benchmark rate having fallen from a peak of seven percent in August 2012.

Hungary is Central Europe’s most indebted nation and its government bonds are rated “junk” by credit rating agencies.

The bank noted that the crisis in neighbouring Ukraine caused uncertainty, reiterating its cautious policy stance. However, it expressed confidence in Hungary’s ability to finance itself.

The latest cut leaves only the Czech Republic, where borrowing costs are near zero, with lower rates than Hungary among the region’s non-euro zone countries.

It has had to hike interest rates sharply several times over the past decade to contain market blowouts.

Despite a marked improvement in Hungary’s finances in recent years, its high debt pile still leaves it vulnerable.

Prices in April fell in annual terms for the first time in four decades.