Rates are held today, as expected: here are the key messages from the Council

HUNGARY - In Brief 22 Oct 2024 by Istvan Racz

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The base rate was held by the Monetary Council unchanged at 6.5%, the corridor also remaining +/-1%-point around the base rate, as widely expected. This time around, Mr. Virág had left for the IMF/World Bank annual meeting, and so the post-meeting press/analyst conference was held by Csaba Kandrács, the MNB's vice governor responsible for financial sector supervision as consumer protection. As a consequence, the presentation's was slightly reduced, but Mr. Kandrács still said more than what is included in the Council's communique. His main point were: the Council discussed only one option, i.e holding the rates unchanged. This was because the situation appeared so genuinely clear-cut. The decision was made unanimously. By content, there has been no change in the MNB's short term objective (= taking inflation down right to the 3% medium-term target on a sustainable basis already next year) or in its assessment of the current situation. On this latter, Mr. Kandrács effectively repeated Mr. Virág's recent statements: headline inflation is OK, but only on a temporary basis, core inflation is still quite high and is not moving downwards for the time being, the fiscal performance is improving in a satisfactory way, the BOP situation is fine and set to improve further, but external (geopolitical, FED policy and market) conditions have deteriorated, which has affected the forint negatively. The role of the forint exchange rate has become more important lately. Going forward, the MNB will continue to make decisions based on its recent cautious approach, in a data-driven fashion, looking at the specific situation each month. Should conditions require, they would be prepared to k...