"Council members agreed that restrictive monetary policy had to be maintained in order to reach the inflation target in 2025 in a sustainable manner," the minutes from the meeting released on Wednesday show.
The council voted unanimously at the meeting on May 21 to cut the central bank base rate by 50 bp to 7.25%.
The rate-setters noted that inflation would rise temporarily in the middle of the year and stressed that they would closely monitor developments in the prices of services.
They were in full agreement that achieving the general government deficit targets in a credible matter and developments in the external balance were "crucial" factors affecting Hungary's risk perceptions. They also said that preserving financial market stability remained "essential" in order to achieve price stability in a sustainable manner.
They acknowledged the effect of the international monetary policy environment on the room for rate policy maneuver in Hungary, particularly the persistently high-interest rate environment in the United States.
The policymakers said CPI might return to the central bank's 3pc +/-1pp tolerance band in a sustained manner from 2025. They pointed out that, after a period of high inflation, the decline in inflation expectations was a "prolonged process" and expectations had to be anchored to the inflation target again.
The council said decisions on any further reductions in the base rate would be taken in a "data-driven manner", based on incoming macroeconomic data, the outlook for inflation and developments in the risk environment.
Producing journalism that is worthy of the name is a costly business. For over 30 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.
