Hungary central bank cuts leading interest rate 0.25 pct point to 7.5 pct

Sep 24, 2007 - The Hungarian central bank today lowered its key interest rate by a quarter of a percentage point to 7.50 pct, the bank's rate-setting Monetary Council said in a statement.

The rate cut had been widely expected by analysts, who say inflation in Hungary is now on a downward path.

According to the latest consumer price data published by the central statistics bureau KSH earlier this month, the annual rate of inflation in Hungary stood at 8.3 pct in August, fractionally lower than the 8.4 pct recorded in July.

In the period from January to August, the 12-month rate of inflation averaged 8.5 pct.

Hungary's high inflation rate partially reflects big cuts in state subsidies for household energy, which were implemented to rein in the public deficit, which at 9.2 pct of gross domestic product is the highest in the European Union.

The Hungarian central bank forecasts the annual rate of inflation to average 7.6 pct in 2007. Inflation is then expected to slow sharply to 4.5 pct in 2008.

The central bank had already cut its key interest rates by a quarter-point to 7.75 pct in June. Prior to that, the interest rate had been held at 8.0 pct since October of 2006.