Central bank’s surprising interest rate decision: forint falls

As we wrote earlier today, Tuesday’s interest rate decision by the Hungarian central bank could move the forint. The Monetary Council of the central bank cut the base rate by 75 basis points to 12.25 percent. At the same time, the two ends of the interest rate corridor were also lowered by the same amount, according to a decision published on the central bank’s website.

The Monetary Council of the National Bank of Hungary (MNB) held another interest rate decision meeting on Tuesday. It decided to cut the base rate by 75 basis points, Portfolio reports. This marks a change in the pace of interest rate cuts after five consecutive 100 basis point rate cuts.

As previously expected, all options were possible, from keeping the interest rate on hold to a 100 basis point cut. The decision is a slight surprise compared to the expectations of most experts.

Read also: Forint in focus today: Interest rate decision on the table

Forint falls after MNB cuts interest rates

The Hungarian currency reacted poorly to the interest rate decision. Analysts had expected the central bank to slow to 50 basis points per month from the previous 100 basis points, but it cut rates by a larger amount, to 75 basis points. Unsurprisingly, the forint weakened slightly on the back of the stronger-than-expected easing, Portfolio notes.

In recent minutes (around 2 PM), the EUR/HUF exchange rate has reached the 383 level.