"Budapest's Central Bank Decreases Base Rate Once Again"

Published: November 22 2023

The Hungarian central bank, NBH, has once again decreased the base rate in Budapest. This decision was made at a regular policy meeting and was driven by factors such as strong disinflation and stability in financial markets. The Council is cautiously assessing the macroeconomic data and will make further decisions based on these factors in the coming months.

At the policy meeting, the NBH rate-setters decided to cut the base rate by 75 basis points to 11.50 percent. They also lowered the symmetric interest rate corridor, bringing the O/N deposit rate to 10.50 percent and the O/N collateralised loan rate to 12.50 percent.

The Council justified the rate cut by pointing to strong disinflation and the stability of financial markets. However, they also acknowledged that external risks still warrant a cautious approach. The positive real interest rate, driven by accelerating disinflation, has supported the further decline in inflation.

NBH deputy governor Barnabas Virag stated that the base rate could fall below 11 percent by the end of the year and possibly reach single digits by February 2024. He also projected that inflation could be around 7 percent by year-end, with short-term repricing patterns similar to those before 2020.

The NBH's decision to decrease the base rate once again reflects the ongoing efforts to stimulate the economy and manage inflation. Despite the positive developments of strong disinflation and stable financial markets, external risks continue to be a factor in the cautious approach to monetary policy.

What did the Hungarian central bank (NBH) recently announce? The NBH recently announced a decrease in the base rate by 75 basis points to 11.50 percent at a regular policy meeting.

Why did the NBH decide to decrease the base rate? The NBH cited strong disinflation and stability in financial markets as reasons for the rate cut. However, they also mentioned that external risks still warranted a cautious approach.

What are the new interest rates in Hungary after the rate cut? The symmetric interest rate corridor was also lowered in tandem with the base rate cut. The new rates are the O/N deposit rate at 10.50 percent and the O/N collateralised loan rate at 12.50 percent.

What factors will the NBH consider for future changes in monetary conditions? The NBH will continually assess incoming macroeconomic data, the outlook for inflation, and developments in the risk environment. They will base their decisions on these factors in the coming months.

What did the NBH deputy governor predict about the base rate? The NBH deputy governor, Barnabas Virag, predicted that the base rate could fall under 11 percent by year-end and could reach single digits by February 2024.

What did the NBH deputy governor say about inflation? The NBH deputy governor stated that inflation could be "around 7 percent" at year-end. He also mentioned that short-term repricing patterns showed a similar picture to the period before 2020.

What risks did the NBH identify that warranted a careful approach to monetary policy? The NBH mentioned the risks surrounding global disinflation and volatility in international investor sentiment as factors that required a careful approach to monetary policy.

What did the NBH say about domestic real interest rates? The NBH stated that domestic real interest rates had risen further due to accelerating disinflation. They also noted that the positive real interest rate supported the further decline in inflation.

How often does the NBH hold policy meetings? The NBH holds regular policy meetings where rate decisions are made. The frequency of these meetings is not specified in the given information.