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Hungarian Central Bank Cuts Interest Rate To Record Low

Hungary's central bank on Tuesday lowered its policy interest rate for the thirteenth time in a row to a new record low, and to a greater extent than expected by economists, as inflation continues to weaken.

It is widely believed that the central bank is on course to slow down its monetary easing program amid increasing pressure on emerging market economies from the withdrawal of capital by foreign entities.

The Monetary Council of the the Magyar Nemzeti Bank reduced its two-week deposit rate by 20 basis points to 3.8 percent at today's meeting, following a quarter percent cut in July.

The bank has cut the rate every month since July 2012, after holding it steady for seven months in a row. Economists had forecast the bank to lower the rate to 3.9 percent today.

Hungary's consumer price inflation weakened unexpectedly to 1.8 percent in July from 1.9 percent in June, owing mainly to lower costs for electricity, gas and other fuels.

The economy recovered modestly in the second quarter, after staying in recession for more than a year. Gross domestic product increased 0.5 percent in the June quarter from the corresponding period of last year, reversing the first quarter's 0.9 percent contraction.

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