Listen to the audio version of this article (generated by AI).
Listen to the audio version of this article (generated by AI).
The council also decided to lower the O/N deposit rate by 25 bp to 5.25% and the O/N collateralised loan rate by 25 bp to 7.25%. The rates mark the ends of the central bank’s symmetric interest rate corridor.
The policymakers had not changed the key rate since September 2024.
In a statement released after the meeting, the council said that “favourable developments in underlying inflation and the stability of financial markets allowed for a cautious reduction in interest rates”, pointing to a drop in headline CPI to 2.1% in January.
The council noted that the central bank’s latest forecast shows CPI under the 3% target in the coming months, before temporarily rising close to the upper bound of the +/-1 pp tolerance band, according to the MNB’s latest forecast.
“The central bank will continue to ensure positive real interest rates in order to achieve the inflation target in a sustainable manner,” the council said.
The council reiterated the need for a “careful and patient” approach to monetary policy due to risks to the inflation outlook, and said price stability can be achieved “through tight monetary conditions”.
“The council is constantly assessing the impact of incoming macroeconomic data and financial market developments on the inflation outlook, based on which it will take decisions on the level of the base rate in a cautious and data-driven manner from meeting to meeting,” the statement said.
At a press conference after the meeting, central bank governor Mihaly Varga said the 25 bp rate cut was the only option discussed. He added that the decision did not mark the start of a loosening cycle.
The governor said the rate cut was made possible by favorable inflation developments and financial market stability.
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.
