Central bank cuts base rate by 75 basis points
The Council also decided to lower the symmetric interest rate corridor in tandem, bringing the O/N deposit rate to 9.00 percent and the O/N collateralised loan rate to 11.00 percent.
In a statement released after the meeting, the Council said the country’s risk perception continued to improve “despite a volatile global sentiment”, allowing the base rate to continue to be lowered.
They said Hungary’s risk perception improved further despite a “volatile global sentiment” thanks to “the trend-like improvement” in the country’s current account balance, and the current account balance-to-GDP ratio improved by more than 8 percentage points in 2023.
The Council said “the utilisation of new export capacities built recently and the improving global economic environment” were expected to give new impetus to exports in the coming years. The inflow of EU funds, they added, would contribute to boosting Hungary’s net lending and an increase in central bank foreign exchange reserves.
Disinflation is expected to continue in the first quarter and inflation “is likely to approach the upper bound of the tolerance band in the spring months”, the Council said.
“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,” they added.
At a press conference after the meeting, deputy bank governor Barnabas Virag said improvements in macroeconomic fundamentals could have allowed a bigger cut, but said “noise” on money markets that started a week ago Monday had justified the 75 basis point option.