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Germany in Recession, Switzerland Reassures on Inflation, Hungary Cuts Rates Again

ECONOMYGermany in Recession, Switzerland Reassures on Inflation, Hungary Cuts Rates Again

Germany has once again reported a downturn in its economy for the fourth quarter in a row. Switzerland has provided reassurances regarding inflation growth while Hungary has cut interest rates for the fourth consecutive meeting.

Continuing Recession in Germany

Recent data suggests that the economic situation in Germany, our western neighbor, continues to be unimpressive. Preliminary GDP change data for the fourth quarter showed a decrease of 0.4%. This is, therefore, the fourth consecutive downturn, which suggests an overall decline in GDP over the year. This data aligns with analysts’ expectations. The German economy is currently experiencing significant problems, although considering the reference point of the entire eurozone, this is not unusual. The entire eurozone ended the quarter with no change in GDP, and over the year we saw a symbolic increase of 0.1%. These data were even better than expected, though the discrepancy was just 0.1%, which did not lead to changes in the currency market.

Speech by the Head of SNB

Thomas Jordan, the head of the Swiss National Bank, yesterday calmed the markets. He admitted that inflation will increase in January, but it should not exceed 2%. According to the bank’s forecast, it should also be below 2% on average by the end of the year. Attention was also drawn to the increase in VAT and electricity costs as reasons behind the current upward swing. Like other Western Central Banks, Switzerland has stopped raising interest rates for several meetings, and the topic of reductions is slowly emerging. Throughout the entire cycle, during 5 increases, the main interest rate in this country grew from -0.75% to 1.75%.

Hungary Cuts Interest Rates

Budapest continues its series of interest rate cuts. Like the previous three decisions, the latest one was another reduction by 0.75%. The market expected faster cuts, up to 1%. However, looking at the rule of a monthly move of 0.75%, there is a certain consistency in the actions of the Central Bank. The current level of interest rates remains 10% and leaves room for many more rate cuts. It is worth noting that inflation has been falling faster than interest rates in recent months, which suggests we should expect a continuation of this trend.

Maciej Przygórzewski – Chief Analyst at and

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