Analysts expect only 25bps base rate cut tomorrow

HUNGARY - In Brief 17 Jun 2024 by Istvan Racz

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Ten out of twelve analysts surveyed by Portfolio.hu are saying now that the Monetary Council is likely to reduce the monthly base rate cut to 25 bps at tomorrow's rate-setting meeting. The remaining two are saying that a 50 bps cut is still more likely. Until 2-3 weeks ago, the predominant analyst expectation was a 50 bps rate reduction in June. But since then, the forint has depreciated against the euro markedly, and the MNB is unlikely to want the EURHUF rate to go above the 400 level, from the most recent 395-400 range. This makes much sense in our view. The MNB has a number of reasons to be cautious about inflation prospects, and so a potential rapid depreciation of the forint is unlikely to be a desirable scenario for them. It seems that the recovery is being taken care of by high wage growth for now, and the BOP's position is nearly excellent, and so there is no urgent need whatsoever for a weaker forint. Analysts remain cautious about further interest rate policy, expecting the MNB base rate at 6.5% at end-2024.