Central bank cuts base interest rate to 9 percent

The Council also decided to lower the symmetric interest rate corridor in tandem, bringing the O/N deposit rate to 8.00 percent and the O/N collateralised loan rate to 10.00 percent.

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.

At an online press conference after the meeting, central bank deputy governor Barnabas Virag 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.

Virag 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 percent 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.

Answering questions, Virag said all of the internal members of the Council had voted for the 100 basis point cut, which was supported by the “large majority” of members, but there was also backing for a 75bp reduction.