Hungarian central bank cuts the base rate again
Change language:
Hungarian central bank rate-setters reduced the base rate by 75 basis points, to 8.25 percent, at a regular policy meeting on Tuesday.
The Council also decided to lower the symmetric interest rate corridor in tandem, bringing the O/N deposit rate to 7.25 percent and the O/N collateralised loan rate to 9.25 percent.
At the previous policy meeting in February, the Council had cut the base rate by 100 basis points.
In a statement released after the meeting, the Council said that “over the past few months, disinflation in the Hungarian economy has been stronger than expected, while external and domestic demand pressures have remained persistently low. However, in the volatile international sentiment, the risk premium on Hungarian assets has also risen recently”.
“According to the assessment of the Monetary Council, the continued strong and general disinflation allows a further reduction in the base rate, while the increasing financial market risk aversion justifies a slower pace than in February,” the Council added.
At an online briefing after the meeting, central bank deputy governor Barnabás Virág said the slower pace of easing was justified by increasing risk aversion. He added that the policy makers had discussed three options, a 50bp, 75bp and 100bp cut, and decided unanimously on the 75bp one.
The decision on Tuesday marks the end of a phase of monetary policy operating with “large steps” and the start of a new phase said Virág.
He said the pace of rate cuts would slow in the second quarter, adding that maintaining a tight monetary policy stance was necessary.
Virág said that financial stability plays a “key role” in the sustainable achievement of the inflation target.