Hungary's central bank will probably reduce its benchmark interest rate, the European Union's highest, for an 11th straight month as an appreciating currency keeps inflation subdued, a survey of economists showed.
The Budapest-based central bank's 13 rate setters, led by central bank President Zsigmond Jarai, may lower the two-week deposit rate today by a quarter-point to 6.5 percent, the lowest since June 2003, according to 11 of 12 economists surveyed by Bloomberg Aug. 15. One forecaster predicted a half-point cut.
The forint has gained 4.4 percent since the end of May as foreign investors buy local bonds to lock in returns before borrowing costs fall further. Interest rates have dropped in the newest EU members, including Poland and the Czech Republic, as strengthening currencies helped curb inflation. Hungary's inflation rate has been lowered to 3.7 percent in July from 7.6 percent in May 2004.
The central bank will announce its decision along with new inflation forecasts. The bank forecast an inflation rate of 3.3 percent in December and 3.2 percent a year later in its last consumer-price report released May 23. It should decline next year after the government cuts the top value-added tax rate to 20 percent from 25 percent on Jan. 1, Jarai said July 18.