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Rate-setters not unanimous on scale of cut in September

Government

Members of the National Bank of Hungary's Monetary Policy Council were again divided over the scale of a rate cut made at its September 24 meeting, the condensed minutes of the meeting published Wednesday show. 

Six of the Council's seven members voted for a 20bp cut and one voted for a 10bp reduction. MNB governor György Matolcsy as well as his deputies, Ádám Balog and Ferenc Gerhardt, voted for the 20bp cut, together with external members Andrea Bártfai-Mager, György Kocziszky and János Cinkotai. External member Gyula Pleschinger voted for the smaller cut.

The 20bp cut decided by the Council on September 24 brought the base rate to 3.60%. Pleschinger -- referred to as "one member" of the Council in the minutes -- argued that the rising slope of the yield curve of Hungarian government securities had risen, which could reflect market concerns over the continuation of the central bank's easing cycle. He proposed the easing should be "more cautious" in light of Hungary's high external financing requirement.  

Other Council members were of the view that developments in inflation and the real economy as well as international events allowed a reduction in the base rate of the same scale as that in August, however.

At the previous rate-setting meeting, in August, the Council voted 5-2 for a 20bp cut. At that meeting, Cinkotai voted with Pleschinger for a 10bp reduction. The other members noted that Hungarian government securities yields at the long end of the curve, had fallen since the August rate decision.

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