At its meeting on 5 April 2004, the Monetary Council considered the latest economic and financial developments and decided to reduce the central bank base rate by 25 basis points, from 12.25% to 12.00%. The decision will take effect on 6 April 2004.
Business conditions have improved and Hungary’s equilibrium indicators recovered in recent months. These encouraging developments, coupled with the Government’s actions to rebalance the economy, have strengthened confidence in economic policy. Reflecting the improved economic picture of the Hungarian economy and the brighter outlook for future performance, foreign investors’ assessment of the risks facing the economy has improved in the past two months.
The improvement in investors’ attitudes to risk has increased the MNB’s room to alter its interest rate policy and eased the conditions for meeting its inflation objectives. The combination of Hungary’s economic fundamentals improving in line with the Bank’s expectations and investors upgrading their risk assessment has allowed the Bank to cautiously lower interest rates, without putting its objective to meet the December 2005 inflation target at risk. There has been no change in the Monetary Council’s evaluation of economic conditions since its meeting on 22 March. Nonetheless, the recent favourable trends are vulnerable. Consequently, the Monetary Council judges it necessary to maintain a cautious and gradual approach.