As expected: Hungarian central bank has put on the brakes

Hungarian central bank policymakers cut the base rate by 25 basis points to 7.00 percent at a scheduled meeting of the Monetary Council on Tuesday.

The Council also decided to lower the symmetric interest rate corridor in tandem, bringing the O/N deposit rate to 6.00 percent and the O/N collateralised loan rate to 8.00 percent.

At the previous policy meeting in May, the Council had cut the base rate by 50 basis points.

In a statement released after the meeting, the council acknowledged that the outlook for inflation had improved in the past quarter.

“In addition, the incipient recovery in Hungarian economic growth, historically high foreign exchange reserves, the persistent improvement in the current account balance and a cautious approach to monetary policy act in the direction of an improvement in the country’s risk perception,” they said.

“However, the volatile financial market environment, significant geopolitical tensions and the risks to the outlook for inflation continue to warrant a careful and patient approach,” they added.

The measure has led to a strengthening of the forint, after weeks of decline.

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