MNB Cuts Base Rate by 75 bp to 10%


Photo by T. Schneider /

The Monetary Council of the National Bank of Hungary (MNB) decided to cut the central bank base rate by 75 bp to 10% at a monthly policy meeting on Tuesday.

The scale of the reduction was the same as at the previous rate-setting meeting in December.

The council also decided to lower the symmetric interest rate corridor in tandem, bringing the O/N deposit rate to 9% and the O/N collateralized loan rate to 11%.

In a statement released after the meeting, the Council said disinflation over the past few months had been "stronger than expected", while external and domestic demand pressures remained "persistently low". As a result of the trend-like improvement in Hungary's current account balance, the country's risk perception improved further despite volatile global sentiment, the policymakers added, outlining factors allowing a continued reduction in the base rate.

The council said 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. In the coming months, decisions on any further reductions in the base rate and their optimal pace will be made on the basis of this information, in a data-driven manner," the policymakers added.

Fielding questions at a press conference after the meeting, deputy governor Barnabás Virág said the council had discussed both a 75 bp and a 100 bp rate cut, as at the policy meeting in December.

He acknowledged that improvements in macroeconomic fundamentals could have allowed a bigger cut, but said "noise" on money markets that started a week ago Monday had justified the 75 bp option. 

He added that "disciplined, cautious, stability-oriented" monetary policy was "key".

Asked how the Council voted on the two options, Virág said a "large majority" had backed the 75 bp cut. The vote will be published in the minutes from the meeting, he added.


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