Economy 21 July 2020, 2:00pm

Hungary cenbank lowers base rate again

Portfolio

The National Bank of Hungary (MNB) has on Tuesday lowered its base rate by 15 basis points to 0.6%, as expected. Other interest rates have been left on hold, i.e. the interest rate corridor remains asymmetric.

The Monetary Council of the MNB delivered a surprise rate cut in June, taking the base rate to 0.75% from 0.9%. This time, the 15-bp reduction was expected. Deputy Governor Barnabás Virág, who took over from the unexpectedly resigned Márton Nagy, had already suggested there would be another cut this month. The reduction of the base rate can be effective if the MNB accepts bids at 0.6% also at its 1-week deposit tenders.

Analysts polled by Portfolio all projected a 15bp monetary easing for today, and also forecast that this will be effective by lowering the 1-week depo rate.

Earlier Virág suggested that this could be the last rate reduction the MNB carries out in a bid to stimulate economic growth. The market now thinks that unconventional tools could take the centre stage in the coming months, and that the MNB will try to prop up economic growth via targeted measures.

Analysts think the earliest the MNB could decide on adjusting its monetary toolkit is September. The steps could include mainly the expansion of the Funding for Growth Scheme (FGS) and the Bond Funding for Growth Scheme (BGS).

The MPC is to publish its official statement on today's rate call at 3 P.M. today, which should give us further guidance on future monetary policy.

Cover photo: Getty Images