Hungary cenbank does not veer off the beaten track
The central bank started cutting interest rates in May, and since then has reduced the effective interest rate by 100 basis points per month from a peak of 18%. At the current meeting, the Monetary Council decided to cut the overnight lending rate, which is the upper end of the interest rate corridor, by another 100 basis points, and, based on previous policy meetings,
the benchmark rate could be lowered by just as much.
We will only know for sure when the MPC will release its official statement at three o'clock, and also when the usual online background discussion with Deputy Governor Barnabas Virág will start. He is expected to talk mainly about the background to today's meeting and the fresh outlook.
Analysts expect the base rate and the one-day deposit (benchmark) rate to converge at 13% at the end of September. For that to happen, the MPC should cut the benchmark by 100 bps at each of the two following meetings. Under the current inflation outlook, the Council could have room for further rate cuts in the fourth quarter that may take rates to around 10% by the end of 2023.
The question is what update Virág will give to the current rate trajectory and inflation outlook.
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