Hungary central bank cuts base rate again

Hungarian central bank (NBH) rate-setters cut the base rate by 75 basis points to 11.50 percent at a regular policy meeting on Tuesday.

NBH deputy governor Barnabás Virág had flagged a 75 bp cut — the same as at the policy meeting in October — days earlier.

The Monetary Council also decided to lower the symmetric interest rate corridor in tandem, bringing the O/N deposit rate to 10.50 percent and the O/N collateralised loan rate to 12.50 percent.

In a statement released after the meeting, the Council said the risks surrounding global disinflation and volatility in international investor sentiment warranted a careful approach to monetary policy.

“The Council is constantly assessing incoming macroeconomic data, the outlook for inflation and developments in the risk environment, and it will take decisions on additional changes in monetary conditions based on these factors in the coming months,” the statement said.

It said Tuesday’s rate cut had been possible because of strong disinflation and the stability of financial markets, adding, at the same time, that external risks continued to warrant a cautious approach.

The Council also said the domestic real interest rate had risen further on the back of accelerating disinflation, adding that the positive real interest rate supported the further decline in inflation.

At a press event held after the meeting, NBH deputy governor Barnabas Virag said the base rate could fall under 11 percent by year-end and could reach the single digits by February 2024.

Addressing the macroeconomic outlook, he said inflation could be “around 7 percent” at year-end, adding that short-term repricing patterns showed a similar picture to the period before 2020.

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