Hungary Tests Investors With Rate Cut as Recession Deepens

Hungary’s deepening recession prompted the central bank to unexpectedly lower the European Union’s highest benchmark interest rate as policy makers test investors’ tolerance for lower borrowing costs, said economists from London to Budapest.

The Magyar Nemzeti Bank cut the two-week deposit rate to 6.75 from 7 percent percent yesterday, the first decrease since April 2010. It will probably ease policy further this year as concerns about the lack of economic growth outweigh accelerating inflation, economists at Morgan Stanley, Danske Bank A/S, Equilor Zrt., and Capital Economics Ltd. said.