MNB Cuts Base Rate by 75 bp to 10.75%

MNB

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The Monetary Council of the National Bank of Hungary (MNB) decided to cut the central bank base rate by 75 bp to 10.75% at a monthly policy meeting on Tuesday, according to a report by state news wire MTI.

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

The council also decided to lower the symmetric interest rate corridor in tandem, bringing the O/N deposit rate to 9.75% and the O/N collateralized loan rate to 11.75%.

In a statement released after the meeting, 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.

The council, who discussed the NBH's latest quarterly Inflation Report at the meeting, augured a continued decline in headline CPI and core inflation in the coming months. They put CPI "around 6%" at end-2023, level with the average for the region, and projected disinflation would remain "strong" in Q1 2024, before slowing down.

MNB forecasts average annual inflation of 17.6-17.7% for 2023, 4-5.5% in 2024 and 2.5%-3.5% in 2025.

The council projects the general government deficit could be between 5.2% and 6% of GDP in 2023, while the state debt ratio drops to "around 73%" of GDP by year-end.

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