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MNI NBH Review - July 2023: Convergence Continues

Executive Summary:

  • Rate convergence continues, narrowing the spread between the base rate and the effective rate to 200bps
  • Keeps bank on course for full policy convergence and exit of emergency tools by September
  • Virag strikes cautious tone again, keeping focus on market volatility going forward
Full review including summary of sell-side views here:

NBHReviewJuly23.pdf

In trimming the top-end of their rate corridor as well as the effective policy rate by 100bps, the National Bank of Hungary remain on track to fully converge the base rate and effective rate by September. This would mark a full exit from emergency monetary policy triggered in autumn last year and pave the way for base rate cuts before year-end (market volatility permitting).

There were few surprises in the rate decision itself, but markets took note of Virag’s insistence that policy will be conducted in a predictable manner going forward, leaving little room for any tweaks to the current policy approach.

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