Hungary cbank cuts base rate by 75 bp

Hungarian central bank (NBH) rate-setters cut the base rate by 75 basis points, to 10.75 percent, at a regular policy meeting on Tuesday.

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

The bank’s Monetary Council also decided to lower the symmetric interest rate corridor in tandem, bringing the O/N deposit rate to 9.75 percent and the O/N collateralised loan rate to 11.75 percent.

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 policy makers 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 6.0 percent” at end-2023, level with the average for the region, and projected disinflation would remain “strong” in Q1 2024, before slowing down.

The NBH forecasts average annual inflation of 17.6-17.7 percent for 2023, 4.0-5.5 percent in 2024 and 2.5-3.5 percent in 2025.

The Council projects the budget deficit could be between 5.2 percent and 6.0 percent of GDP in 2023, while the state debt ratio drops to “around 73 percent” of GDP by year-end.

At a press conference after the meeting, deputy bank governor Barnabás Virág said the Council had discussed a 100 basis point cut as well as the 75 point one. The final decision was unanimous, he added.