The Monetary Council of the National Bank unexpectedly cut the base rate from 1.35% to 1.2% for the first time since June 2015. The decision came as a suprise to analysts, who expected the restart of monetary easing in the second half. In its Inflation Report, the central bank slashed its 2015 inflation forecast from 1.7% to 0.3% and raised its GDP forecast to 2.8%
The rate cuts will continue until monetary conditions are in line reaching the inflationary goal, the MNB said. At the meeting policy makers decided to shift the top of the overnight interest rate corridor – a symmetric band around the base rate that prevents extreme fluctuations of interbank rates – downward by 50 basis points.
They also decdied to lower the overnight central bank deposit rate to -0.05% and the overnight collateralized loan rate stands to 1.45%. The new rates will take effect from March 23.
Analysts were expecting the central bank to announce unconventional tools at this meeting and to restart its easing cycle only in the second half of the year. There is a consensus now that the National Bank will continue with further monetary easing in the coming months, bringing the base rate to new record lows, below 1%, The euro was trading at HUF 313 after the decision, up from HUF 311.
