Kind reminder: the MNB is likely to hold the base rate at tomorrow's rate-setting meeting

HUNGARY - In Brief 21 Oct 2024 by Istvan Racz

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The Monetary Council is set to hold its monthly rate-setting meeting tomorrow. With EURHUF at 402, as we are writing this note, a rate cut is highly unlikely this time. This morning, Portfolio.hu published the results of its regular analyst poll. All twelve respondents expect that the Council will keep the base rate unchanged. For end-2024, the median forecast of the same poll is 6.25%, essentially meaning that analysts (ten of them, two expecting no rate cuts at all in the rest of this year) are predicting a 25bps cut in November. This would be exactly the outcome we have been forecasting for more than a month now. Over the past two weeks, Mr. Virág, essentially acting as the spokesman for the Council, warned at least three times that October may not bring about a further rate cut, referring to rising risks stemming from the external environment. Just a few days ago, he happened to say that a decision to hold the base rate both in October and November is also quite conceivable, and, among other things, he also claimed that the importance of the currency exchange rate as a transmission channel for monetary policy decisions has increased lately. This was a pretty clear message, we think. For end-2025, the median expectation in Portfolio.hu's analyst poll of this morning is a 5.25% base rate. In our forecast update released last week, we had a 5% forecast. In making the latter forecast, we assumed that there will be a new governor in the MNB from March, and as a consequence, the Bank's policy line will become, to a moderate extent, more government-friendly.