Budapest  - The Hungarian National Bank cut its base rate by fifty basis points to 9.5 per cent at its monthly rate-setting meeting on Monday, in line with the expectations of analysts.

The deputy governor of the bank, Ferenc Karvalics, told the press that the monetary council had considered three possible cuts of 50, 75 or 100 basis points before settling for the most cautious option.

A basis point is defined as one hundredth of a per cent.

Monday's was the fourth 50-basis-point cut since fear of currency speculators driving the Hungarian forint down prompted the central bank to hike its base rate from 8.5 to
11.5 per cent on October 22 last year.

A weakening of the national currency is of particular concern in Hungary as, besides government debt, most mortgages and personal loans are denominated in foreign currencies, primarily the Swiss franc.

Many Hungarians are already worrying about meeting their repayments as the value of the forint has fallen close to an all time low over recent weeks.

The government estimates that the economy is set to shrink by 2 to 3 per cent this year.

The central bank has to balance a need to stimulate the flagging Hungarian economy by cutting its base rates against the necessity of maintaining financial stability. (dpa)