Policymakers Cut Central Bank Base Rate by 100 bp to 9%

MNB

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The Monetary Council of the National Bank of Hungary (MNB) decided to cut the central bank base rate by 100 bp to 9% at a monthly policy meeting on Tuesday, according to a report by state news wire MTI.

The council also decided to lower the symmetric interest rate corridor in tandem, bringing the O/N deposit rate to 8% and the O/N collateralised loan rate to 10%.

In a press release, the council said disinflation had been "stronger than expected", external and domestic demand pressures remained "persistently low", and Hungary's risk perception had improved further as the current account balance improved.

"This allows the base rate to be lowered at a temporarily faster pace," the council added.

Faster Pace of Easing "Temporary"

At a press conference after the meeting, deputy governor Barnabás Virág said lower-than-expected inflation and improved risk perceptions had allowed for the "temporary" acceleration in the easing cycle from 75bp cuts at the previous policy meetings.

He added that the inflation path was now about half a percentage point lower than the central bank's earlier short-term forecast.

He said the council's expectation for the mid-year interest rate level was unchanged. He added that market players' expectations for an interest rate level of 6-7% at the end of the first half appeared "realistic".

He said the council continued to take a "data-driven" approach and noted the importance of the March Inflation Report in determining the pace of the easing cycle in the second quarter.

Fielding questions, he said all of the internal members of the council had voted for the 100 bp cut, which was supported by the "large majority", but there was also back for a 75 bp reduction.

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