The Monetary Council of the National Bank of Hungary cut the base rate 50bp to 10.50% at a non-rate setting meeting on Monday, the bank said.
The Monetary Council cut the MNB’s key rate 50bp to 11.00% at its previous meeting on November 24 in a move that caught markets by surprise. The meeting was the first rate-setting meeting since the council raised the base rate a sharp 300bp in a unanimous decision at an extraordinary meeting on October 22, just two days after deciding to leave rates on hold at a scheduled meeting.
Last week, MNB governor András Simor said the base rate was higher than the inflation rate would justify, adding it would be cut at a pace the market could sustain.
The Monetary Council voted with an overwhelming majority to cut the base rate 50bp Simor said after the meeting. The other proposal was to leave rates on hold at 11.00%, Simor said. While remaining watchful of the situation on financial markets, the Monetary Council will continue to cut rates in the future if it does not endanger financial stability, Simor said.
If one looks only at the inflation projections, Hungary’s CPI will be under the MNB’s 3.0% inflation target for next year, he added. “The current interest rate is painful for the Hungarian economy, but it will be even more painful if the country’s financial stability is upset,” Simor said. (MTI-Eco)