Analysts expect a 25 bps base rate cut at tomorrow's (for Asian readers: today's) monthly rate-setting meeting

HUNGARY - In Brief 22 Jul 2024 by Istvan Racz
According to Portfolio.hu's usual analyst poll, nine out of eleven participants expect that the Monetary Council will reduce the base rate by 25 bps, to 6.75%, at tomorrow's meeting. The remaining two analysts predicted no change for the base rate in July. For end-2024, the median analyst expectation is a 6.25% base rate, in line (on the optimistic side) with Vice Governor Virág's recent statement that some two or three 25 bps rate cuts may be on the cards in H2 2024. However, this median value does not reflect any consensus, as the forecast range was a pretty wide 5.75-7%, within which the median expectation was predicted by only five out of the total eleven respondents. For end-2025, the median forecast is 5.25%, with an even wider 4.5-6% forecast range, only two analysts expecting exactly 5.25%. But it is quite telling that both ends of the forecast range are moving down for 2025 significantly. As for our forecast, we stay with our latest quarterly prediction of 6.5% for end-2024 and 6% for end-2025. This appears somewhat conservative maybe, but it looks like we may be a bit more optimistic on growth prospects than the average analyst. Anyway, whether or not the Council will cut tomorrow will depend very much on their short-term preference regarding the EURHUF exchange rate: if they want an even stronger forint than EURHUF 390, then they will probably keep the base rate unchanged. And there appears to be around 50% chance for that in our view. 

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