MNI NBH WATCH: Slower Cut Pace, With H1 Goal In Sight
With inflation at 3.7%, National Bank of Hungary likely to add second 50bps cut as "new phase" in policy cycle continues
The National Bank of Hungary is expected to cut key interest rates by 50 basis points on Tuesday, as it continues the more moderate pace of easing associated with the “new phase” of monetary policy established in April. (See MNI EM POLICY: NBH Set For Second 50Bp Cut, H2 Outlook Less Clear)
Stable financial market conditions and the domestic economy, growing at an annual rate of around 1%, are seen supporting the decision to lower the base rate to 7.25%, with another 25-50bp of cuts seen before the end of June.
Uncertainty over the course the Federal Reserve and the European Central Bank will chart post- June means the rates outlook for the second half of the year is less clear, but the NBH has been helped in recent wakes by forint strength.
Deputy Governor Barnabas Virag is expected to reiterate that data-dependency and caution remain the NBH’s watchwords, especially with inflation expected to tick up from its current 3.7% level to between 4-5% in H2. (See MNI EM INTERVIEW: Hungary Central Bank Faces Volatile 2025-KiralyKiraly)