No surprise once again: MNB base rate reduced to 6.5% today

HUNGARY - In Brief 24 Sep 2024 by Istvan Racz

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We, and honestly everyone else in the analyst community, have proven right in predicting the MNB's September rate action. At today's monthly rate-setting meeting, the Monetary Council decided to reduce the base rate by another 25 bps: Indeed, forecasting this step was not really that difficult, in light of the latest (August) favourable CPI-inflation data and the recent rate actions by FED/ECB. Both of these factors were enlisted by the MNB as key determinant of their next rate decision a month ago. As for the other two 'key factors', markets' evaluation of risks and the development of business/consumer confidence, identified by the MNB as crucially important after the August rate-setting meeting, giving an assessment was not that clearcut and straightforward this time, but the MNB eventually said that there was improvement in both areas, event though not a lot in either case. But as a practical shortcut, we could add that whoever saw the continued stability of EURHUF, on the right side of the potentially critical 400 level, may have had a good reason to believe that currency stability was no reason for postponing the next base rate cut from September. Going forward, analysts asked Mr. Virág of the MNB after today's meeting if the Bank still held their earlier indication of yet another 25 bps rate cut in the rest of 2024, if everything goes reasonably well, of course. The vice governor, speaking in the Council's name as usual, tried to be very cautious and somewhat cryptic in his answer, but his eventual response was that he saw no reason to change that formerly issued indication. The Council also discussed the Q3 inflation report today, which will be published on Thur...