Council Voted 7-2 in Favour of 75bp Cut in January, First Dissent Since 2016

• Zoltán Kovács, Mihály Patai voted for a larger 100bp cut.
• The majority of the decision makers agreed that the easing cycle should be continued in 75 basis point increments as in previous months. Two members expected a quick easing in the factors that had contributed to financial market tensions in the week before the interest rate decision, which, in addition to strong disinflation, low demand pressures and developments in analysts’ expectations warranted a reduction of 100 basis points in their view.
• There was a consensus in the Council that positive real interest rates would help disinflation to continue and to achieve the inflation target. However, several members pointed out that as inflation approached the central bank tolerance band, real interest rates were going to fall.
• Risks surrounding global disinflation and volatility in international investor sentiment warranted a careful approach to monetary policy.
• Disinflation in the Hungarian economy had been stronger than expected, while external and domestic demand pressures remained persistently low.

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