BUDAPEST (Reuters) – The National Bank of Hungary (NBH) cut its base rate by another 25 basis points to 6.5% on Tuesday, aided by a fall in inflation and last week’s larger-than-usual cut by the U.S. Federal Reserve.
The NBH, which has slashed borrowing costs by a combined 1,150 bps in its current cycle, has pinned further easing on inflation developments and the policy course of major central banks after temporarily halting rate cuts last month.
Tuesday’s decision was in line with the unanimous forecast of 16 economists in a Reuters poll last week.
Data published since the bank’s August meeting showed Hungarian inflation, which scaled the European Union’s highest levels of more than 25% in the first quarter of last year, falling to a three-and-a-half year low of 3.4% in August.
A decision by the U.S. Federal Reserve to cut its main rate by a larger-than-usual 50 bps last week probably also gave Hungarian rate-setters greater confidence they can resume the policy easing cycle.
“Given the many dovish signals by major global central banks recently, it is to be expected that (NBH) would now nudge its base rate lower from the current 6.75%,” Commerzbank economist Tatha Ghose said in a note before the meeting.
“The forint is currently benefiting from a stronger euro, and is unlikely to be negatively affected by such a rate cut.”
At 1202 GMT, the forint, central Europe’s worst-performing currency with a nearly 3% loss for the year versus the euro, traded at 394.6 per euro, unchanged from levels just before the announcement.
Analysts see the Hungarian base rate, which is still the EU’s highest benchmark alongside that of neighbouring Romania, falling to 6.25% by the end of 2024, implying one more 25-bp rate cut over the coming months.
(Reporting by Gergely Szakacs and Krisztina Than; Editing by Andrew Cawthorne)
