MNI NBH Review - August 2024: The First Pause

Executive summary:

• The National Bank of Hungary kept its base rate unchanged at 6.75%, a pause in its easing cycle.
• The policy statement pointed to the surprise increase in headline inflation in July, while forward guidance was familiar and generally hawkish.
• The NBH is likely to resume easing next month, with a 25bp rate cut, given the September meeting will be accompanied by an updated inflation forecast.

See the full review, with a summary of sell-side analyst views, here:

MNINBHRevAug24.pdf

While the NBH reiterated that it will continue to make decisions in a “cautious and data-dependent” manner, it also offered more specific guidance by stating that that “there may be scope for cautiously lowering interest rates further in the coming period, depending on the expected interest rate policies of the world’s leading central banks, as well as developments in the domestic inflation outlook and changes in Hungary’s risk perception.” For his part, Deputy Governor Virag said expectations of 1-2 more rate cuts by year-end are realistic.

Overall, the guidance is consistent with pre-decision speculation that the hold would be a pause, with easing likely to resume next month followed by one more rate cut, potentially in December, when updated inflation forecasts will be provided.