Hungary central bank cuts base rate to 5%

Hungary's central bank (MNB) announced Tuesday a cut in its base rate by a quarter of a percentage point to 5.0 percent, its lowest ever level, in the first decision under controversial new head Gyorgy Matolcsy. "The Monetary Council has decided to lower the base interest rate by 25 basis points to 5.0 percent," the MNB said in a statement on its website. The widely anticipated move was the eighth consecutive monthly cut by the central bank. In contrast to his predecessor Andras Simor, Matolcsy said he would release a statement later in the afternoon to explain the Council's decision rather than hold a press conference after the rate-setting meeting. Matolcsy, the former economy minister and loyal ally of right-wing Premier Viktor Orban, replaced the widely respected Simor as MNB governor in early March. Analysts have predicted that his focus will be on getting Hungary out of recession, possibly at the expense of higher inflation and a weaker currency, particularly in the run-up to elections in 2014. The rate cut nonetheless left Hungary's currency, the forint, relatively unchanged on Tuesday, trading at 304.90 to the euro after the announcement compared with 305.20 beforehand.