Rate-setters see room for a further decrease


National Bank of Hungary (MNB) rate-setters see a “further slight reduction” in the central bankʼs base rate, according to the condensed minutes of a policy meeting on April 26.

“In the Council’s assessment, the sustainable achievement of the inflation target pointed to a further slight reduction in the policy rate,” according to the minutes. Though they noted that a “watchful approach” to monetary policy is still justified because of “uncertainty in the global financial environment”. 

The Council decided to cut the central bankʼs key rate by 15 bps to 1.05% at the meeting, in line with market expectations.

The minutes from the April meeting show the Council voted 8:1 for the 15 bps cut. János Cinkotai, an external member of the Council who has been less dovish than his colleagues at earlier meetings, also voted for a 10 bps reduction, arguing that members should wait to see whether policy easing by the European Central Bank would have a material impact on corporate lending.

The rate-setters also decided at the meeting to lower the top of the interest corridor, a band around the base rate that prevents extreme fluctuations of interbank rates, bringing the O/N collateralized loan rate to 1.3% while keeping the O/N central bank deposit rate at -0.05%.

At the previous monthly policy meeting, the Council decided to reduce the base rate by 15 bps, too, making a cut for the first time since last summer and signalling possible further easing.

The minutes from the April meeting note that one Council member voiced concern that expectations about the bottom of the easing cycle were “excessively low” and proposed “a stronger signal to the public in the press release about where the MNB thought the interest rate cutting cycle would end”.

Another member argued that the room for interest rate cuts “was narrowing”, the minutes show.

MNB deputy-governor Márton Nagy told journalists at a briefing on Tuesday that the central bank is likely to cut the base rate one more time, but said any further reductions are “highly doubtful”.

In a comment to The Wall Street Journal on Wednesday, Nagy said the interpretation of his statement on Tuesday was “misleading”.

“The rate-setting decision is [always] based on available information [at the given time]. As one member of the Monetary Council, I cannot foretell the decisions of the Council in advance,” he told the paper.


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