Hungarian central bank leaves base rate at 6.5% for the end of the year
As expected, the base rate remained unchanged at 6.5%. The consensus among analysts polled by Portfolio was that the MNB will not budge at this meeting. The central bank did not cut at its last meeting either, the last time it cut the base rate by 25 basis points was in September.
The overall picture has not changed much since the last rate decision meeting:
- Inflation rose from 3.2% to 3.7% in November due to the fading of base effects, while core inflation was 4.4% in November due to high services sector inflation. However, price pressures remained low on a short-term basis.
- Meanwhile, the growth outlook remains mixed. The latest European Purchasing Managers' Indices came in worse than expected, indicating that an improvement in the external environment remains to be seen. The ECB also downgraded the growth outlook in its latest forecast. On the domestic side, wage dynamics remain strong and the fourth quarter did not start badly: retail, industry and construction all expanded in October, although there are question marks over the durability of the trends.
- The forint has weakened substantially against the euro and the US dollar in particular in recent months, which poses an inflation risk looking ahead.
- The country's risk perception has been mixed in recent times. The forint has weakened against the złoty, while S&P Global Ratings has left its rating unchanged, Moody's has downgraded its outlook and Fitch Ratings has upgraded.
Overall, then, the picture is mixed for the variables most closely watched by the MNB, which is why today's decision was expected.
Analysts expect the next rate cut to take place perhaps in the middle of next year, but overall next year is likely to be characterised by more restrained rate cuts, with the central bank not likely to use easing tools much.
At 15:00, as usual every three months, there will not only be the usual background discussion with the central bank, but also the MNB's latest inflation and growth forecast. Portfolio will report on these, as well as the official statement from the central bank, as usual.
Cover photo (for illustration purposes only): Shutterstock
