The interest rate cut was a bit more moderate than last time.
The Monetary Council of the Magyar Nemzeti Bank reduced the central bank base rate by 50 basis points to 7.75 percent, and moderated both ends of the interest rate corridor to the same extent at its interest-rate meeting on Tuesday, MTI announced. At its last meeting in March, the board lowered the base rate by 75 basis points to 8.25 percent, following the 100 basis point reduction in February and the 75 basis point reduction in January. At the background discussion following the last interest rate meeting, Barnabás Virág, the vice-president of the central bank, said that the “fast-step phase” of monetary policy is over, the pace of interest rate cuts will slow down in the second quarter, and monetary policy will enter a new phase.
Based on Portfolio.hu’s assessment, the 50 basis point reduction met expectations, i.e. the cycle of interest rate cuts continued, but at a slower pace compared to previous months. According to them, the slowdown can be understood from several points of view:
- The period of rapid inflation decline is over, from May the indicator will probably be above the central bank’s 2-4 percent target band until the end of the year.
- The exchange rate of the forint could not stabilize at a stronger level, the quotations against the euro were stuck above 390. This worsens the inflation picture.
- With the interest rate cuts, the regional yield levels have come close, and our risk premium for developed markets has been continuously narrowing.
They believe that monetary easing may even stop completely from the middle of the year.
