MNI NBH Review - June 2024: Tilting Hawkish
The National Bank of Hungary cut its base rate by 25bps to 7.00%, marking a slowdown in its easing pace.
Executive Summary:
- The National Bank of Hungary cut its base rate by 25bps to 7.00%, a moderation from the 50bp cut delivered in May.
- The policy statement offered few surprises, maintaining the familiar “cautious” tone as has been present in previous editions. Downward revisions were made to the central bank’s inflation forecasts.
- Deputy Governor Virag reiterated that the scope for additional rate cuts is “narrow”, and explicitly mentioned a pause as an option moving forward.
See the full review, with a summary of sell-side analyst views, here:
The policy statement pointed to improvements in the inflation outlook as well as the recent CPI readings that came in below expectations. Combined with improvements in Hungary’s risk profile, this facilitated the reduction in the base rate, although the Council noted that heightened financial market volatility, geopolitical risks and upside risks to inflation warrant a cautious approach, and hence the size of the rate cut was moderated this month compared to May.
While the previous statement highlighted the possibility of a “further reduction in the base rate in a cautious and data-driven manner,” the June edition states that the Council “will take decisions on the level of the base rate in a cautious and data-driven manner,” a slight hawkish adjustment. Meanwhile, Deputy Governor Virag’s press conference maintained the usual hawkish bias, stating again that the room for additional easing is “narrow” due to external risks. This time, however, the Deputy Governor explicitly mentioned a pause as an option during the Q&A session, and said the NBH would make "separate" calls each month.