2016.04.2702:50:00UTC+00Mnb Signals Additional Rate Reductions, Likely to Further Lower by 15bp

Hungary’s central bank lowered its key interest rate yesterday to 1.05%, reducing by 15bp, on par with expectations. Moreover, the MNB has signalled at further rate reductions. According to the central bank’s statement, the MNB is prepared to utilize any instrument in order to attain the inflation target. The central bank thinks a slight reduction in the policy is needed.

Hungary’s inflation has constantly stayed lower than the target rate and is likely to reach the target rate only in 2018. According to the March Inflation Report, inflation and core inflation both continue to decelerate, while the economy continues to have unused capacity that will curb price pressures for a longer period of time.

The Hungarian central bank is likely to lower its interest rate again by 15bp; but there is possibility of more cuts, said Nordea Bank. The decision to lower rates was neutral for the HUF. The anticipation of additional easing was not sufficient to depreciate the HUF notably, noted Nordea Bank.