Hungary's central bank cuts interest rate by 15 points

In line with analyst expectations, the rate-setting Monetary Council of Hungary's central bank cut the benchmark interest rate by 15 basis points to 1.05 percent at its meeting on Tuesday.

It also reduced the interest rate it charges for overnight loans from 1.45 percent to 1.30 percent, while leaving the rate for overnight deposits at 0.05 percent.

The bank last reduced interest rates a month ago, when it introduced the negative interest rate on overnight deposits.

At the time the council said to expect rate reductions until monetary conditions coincide with targeted inflation.

The statement issued after this meeting noted that despite a growing economy the country was dealing with deflationary phenomena, whereas the bank would like to see a measure of inflation.

Instead, in March of 2016 both headline and core inflation went down since low global inflation was keeping domestic consumer prices down.

The bank expects inflation to remain below the 3 percent target this year and next, and to only approach the 3 percent in early 2018.

The bank has chosen to reduce the benchmark rate by another 15 basis points, to 1.05 percent, in an effort to reduce the risks of too low an inflation rate. The statement said that further small cuts in interest rates were probable. Endit