MNI NBH Review - March 2024: Unsurprisingly Hawkish

Executive Summary:

• The National Bank of Hungary cut its base rate by 75bps to 8.25%, a moderation from the 100bp cut delivered in February.
• In its policy statement, the NBH maintained its “cautious” tone and was unsurprisingly hawkish. It did not offer any firm forward guidance over the rate path moving forward.
• Deputy Governor Virag said the pace of rate cuts would slow from Q2, and that while both 50bp and 100bp options were discussed, the 75bp cut was ultimately made unanimously.

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

MNINBHRevMar24.pdf

Communication from the NBH was unsurprisingly hawkish. “According to the assessment of the Monetary Council, the continued strong and general disinflation allows a further reduction in the base rate, while the increasing financial market risk aversion justifies a slower pace than in February,” the NBH said in a statement. While there was no specific mention of recent HUF weakness, this is implicit in the reference to “market risk aversion”. Overall, the decision and stance of the policy statement was in-line with expectations, though some analysts had flagged risk of a smaller 50bp cut.

In his post-decision press conference, Deputy Governor Virag said the pace of easing will likely slow in Q2. Virag also stated that while 50bp and 100bp rate cut options had been considered, the 75bp move was ultimately made unanimously following two consecutive split vote decisions. Given there had been some muted speculation of a 50bp cut the unanimous vote is perhaps the only surprise from Tuesday’s meeting.

Virag said the Monetary Council views the 6.50-7.00% base rate range as the most realistic for the policy rate at the end of June (compared to the 6.00-7.00% range mentioned previously). This would imply 50bp and 75bp moves will be the base case moving forward. The comments add to the hawkish signals from the policy statement – which fell short of offering forward guidance on the specific rate path moving forward – and corroborate sell-side views that the March meeting marks the beginning of a permanent slowdown in easing pace.