Actual: 7.00 %
Consensus: 7.00 %
Previous: 7.00 %
The central bankers decided to keep interest rates unchanged, while a 25bps cut was a second discussed option. The decision is in line with expectations. The MNB statement does not refer to a need for further tightening any more, which indicates that the central bank believes that inflation will decrease, and is not as concerned of a negative pressure on the forint and bonds as it was before. The forint has firmed significantly since the beginning of the year and risk premia have shrunk. The Hungarian inflation is elevated mostly due to non-core items and the stronger currency will help to bring it lower.
The MNB sees no demand-side inflationary pressures and still repeats that the IMF/EU deal is very important. This supports our view that the economy would welcome lower interest rates, but the central bank will wait until the deal is approved, because it will be an important factor for risk assessment. Although the government is likely to finally reach the deal, it may take a couple of months, when uncertainty will persist.