MNI NBH Review - January 2024: Pace of Easing Unexpectedly Maintained

Executive summary:

• The National Bank of Hungary cut its base rate by 75bps to 10% against consensus of a larger 100bp move.
• In its policy statement, the NBH reiterated that it would maintain a cautious approach to further rate cuts.
• Deputy Governor Virag said declining risk sentiment warranted the smaller-than-expected move, though a 100bp cut will be considered at the February meeting.

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

MNINBHRevJan24.pdf

Despite Deputy Governor Virag strongly hinting in mid-January that the Committee would increase the pace of cuts, the National Bank of Hungary decided to err on the side of caution and maintain the previous pace of monetary policy easing. Virag confirmed that fundamental factors (softer-than-expected CPI data, EU fund disbursement since December and an improvement in the current account position) would have facilitated a 100bp cut, but deterioration in Hungary's risk assessment warranted the smaller move instead. The Deputy Governor added that a 100bp move will be considered in February, though this guidance was far less firm compared to that offered earlier this month (100bp cuts have been considered in several previous meetings).

Interestingly, Virag said the 75bp cut had a “broad majority”. Decisions by the NBH are almost always made unanimously. Indeed, the last dissent among the council came in 2016. This gives particular importance to the upcoming meeting minutes which otherwise tend to offer little new information. Minutes from the Monetary Council meeting will be published on February 14 and the next MPC meeting will take place on February 27.