MNI NBH Review - February 2024: "Temporarily" Increasing the Pace

• The National Bank of Hungary cut its base rate by 100bps to 9%, increasing the size of cuts from the 75bps delivered at the previous four meetings.
• In its policy statement, the NBH described the increase in the pace of easing as 'temporary', while the central bank’s commitment to making moves in a cautious and data-dependent manner was reiterated.
• In his post-decision press conference, Deputy Governor Virag said he still sees the key rate in the 6-7% range by the end of June.

MNINBHRevFeb24.pdf

The central bank maintained its cautious tone from previous policy statements and described the scaling up of rate cuts as 'temporary', without specifying for how long the accelerated pace will be maintained. Meanwhile, Deputy Governor Virag said he sees the key rate in the 6-7% range by the end of June, which implies that rate cuts are being frontloaded at least to some degree. Given Virag’s view of the key rate is unchanged, the temporary 100bp moves are likely to precede smaller steps thereafter – a view which is shared among many sell-side analysts.

The overall cautious tone of post-decision communication also highlights the central bank’s sensitivity to adverse market developments and suggests that the performance of the HUF will continue to determine the pace of forthcoming easing - meaning another 100bp step in March is far from a foregone conclusion.