Reuters poll: MNB to cut base rate again next week

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A total of 16 of 22 analysts participating in a Reuters poll predicted that the National Bank of Hungary (MNB) Monetary Policy Council would cut the bank’s base rate by 10 basis points to a new historical low of 2.75% at its rate-setting session on Tuesday, February 18.

Three of the analysts participating in the poll conducted between February 10 and February 13 said that the Monetary Council would cut the base rate by 15 basis points on Tuesday, while one analyst forecast a 5-bp cut. The remaining two analysts taking part in the poll predicted the MNB Monetary Council would leave rates on hold.

Reuters reported that some of the analysts participating in the poll said that the MNB could call a halt to its current rate-cutting cycle in March.

The MNB’s Monetary Council has reduced rates at each of its monthly rate-setting sessions since August 2012 – by 25 bp for twelve months through July 2013, then by 20 bp over the subsequent five months through December of last year before reducing the pace of cuts to 15 bp in January. Seven of the Monetary Council’s eight members voted in favor of the 15-basis-point cut in January, while one voted for a 10-basis-point cut.

Palotai: Monetary conditions must support real economy
MNB monetary policy director Dániel Palotai garnered some media attention based on the speculation yesterday, informing local business news outlet Világgazdaság that “Inflation expectations have retreated close to the 3% target.” Palotai added that “in an environment where the economy is performing below its potential and inflation pressure is moderate, achieving price stability in the medium term requires monetary conditions that support the real economy.”

This “real economy” would be assessed in the next MNB rate-setting meeting on Tuesday, when bank officials “will take into consideration and evaluate exchange rate changes.”

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