At their November meeting, the Monetary Council of the Hungarian National Bank (MNB) decided to cut the base rate by 75 basis points. The boundaries of the interest rate corridor were also lowered by 75 basis points without counter-votes.
The base rate was thus lowered to 11.5 percent. The Monetary Council members were unanimous in their view that strong disinflation and a reduction in the country’s vulnerability would allow for a cut in the base rate, they declared.
Policymakers pointed out that the technical recession in the real economy has come to an end.
In the third quarter of 2023, gross domestic product contracted by 0.4 percent year-on-year, while economic output was already up 0.9 percent quarter-on-quarter. They also pointed out that the country’s external balance position is showing a rapid and significant improvement, and looking up. The current account balance could improve more than previously expected and the account deficit is projected to narrow to below one percent of GDP in 2023.
In the Council’s overall assessment, the development in Hungarian macroeconomic fundamentals continued in several areas. Domestic inflation remains broadly unchanged, with a significant decline. Several policymakers pointed out that
inflation returned to the single-digit range in October earlier than previously expected, with only nine months having passed since peaking above 25 percent in January, they wrote.
The inflation and core inflation will continue to decline. Inflation in December could already be around seven percent. The consensus view is that disinflation should continue into 2024.
Via MTI; Featured Image: Pixabay