National Bank Cuts Base Rate by 75 Basis Points

The Monetary Council of the National Bank of Hungary (MNB) cut the base rate by 75 basis points to 10.75% at its last interest rate decision meeting of the year on Tuesday, and also cut the two edges of the interest rate corridor by the same amount.

Although the decision was in line with analysts' expectations, the Hungarian currency, the forint weakened against the major currencies in the afternoon.

At its last rate-setting meeting in November, the base rate was also cut by 75 basis points to 11.5%, with the two edges of the interest rate corridor also being cut by the same amount. According to the published abridged minutes, the decision to cut rates was taken without any dissenting votes.

In October, the Monetary Council also implemented a 75-basis-point cut.

Barnabas Virág, the central bank's deputy governor, said after the November 21 rate decision that the policy rate could fall below 11% by the end of the year and into single digits in February 2024.

The MNB last raised the base rate on September 27 last year, by 125 basis points to 13.0%, and announced the end of the rate hike cycle after the meeting. Monetary tightening was continued in October through other means, with the MNB raising the interest rate on the regular one-day central bank deposit tenders to 18%, and then cutting it by 100 basis points at each rate-setting meeting from May onwards. In September, the base rate became the effective central bank rate again after 11 months, and the interest rate corridor around the base rate became symmetric.