No base rate cut in November either, unsurprisingly

HUNGARY - In Brief 19 Nov 2024 by Istvan Racz

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The Monetary Council left the MNB base rate unchanged at 6.5% at the monthly rate-setting meeting held today. As Vice Governor Virág said after the meeting, there was one member who proposed a 25 bps rate cut, but that was voted down by an overwhelming majority of decision-makers. This result was in line with analysts' expectation, given the recent weak performance of the forint. Looking back, a big majority of analysts predicted the end-2024 base rate at 6.25% just one month ago, while expecting no rate action at the October rate-setting meeting. Essentially, this means that they expected a 25 bps cut in November, and honestly, so did we as well at that time. However, the forint was trading at EURHUF 401 on the day when that earlier poll survey was prepared, rather than at today's 407 level, which follows a few undesired breakouts to as far as 411-412 in recent weeks. So, the average (and median) analyst has changed his/her mind since then, predicting no rate cut for today most recently, and so have we as well. In today's post-meeting appearance, Mr. Virág basically said that the MNB is satisfied with what it sees on the inflation front, as disinflation continues, despite the fact that there was a base-effect-driven uptick in the October data, which is likely to remain for the rest of this year, before headline and core would start to decrease again from early 2025. He said that inflation is doing better than expected, and specifically referred to services, mentioning, among others, the good showing of telephone and internet prices, which we find fundamentally unexplained. Unfortunately, he did not make any attempt to explain where on earth that wonderful showing coul...