The reduction of Central Bank rates is to be resumed – Commerbank

The MNB will cut its base rate from the current 6.75%

“The guidance remained that they were still in the process of cutting rates, but not immediately – stubborn inflation in the services sector did not allow for that. The central bank (MNB) wanted to be cautious and aim for a positive real interest rate at the end of the easing cycle. Against this backdrop, market expectations remained for two more 25bp rate cuts by the end of the year.”

“Circumstances have changed slightly since then and one of those cuts is likely to be made today. Hungary’s inflation indicators improved sharply in August, with both headline and core inflation falling sharply. Tax-adjusted core CPI growth slowed from a previous 3-month average rate of around 0.4% y/y to 0.2% y/y.”

“Given the many accommodative signals from major global central banks recently, it is expected that the MNB will now cut its base rate from the current 6.75%. The forint currently benefits from a stronger euro and is unlikely to be adversely affected by such a rate cut.”