Hungary is likely to lower its key interest rate for the second straight month after central bankers signaled a retreat from a tightening cycle that brought borrowing costs to a European Union high.
(Bloomberg) — Hungary is likely to lower its key interest rate for the second straight month after central bankers signaled a retreat from a tightening cycle that brought borrowing costs to a European Union high.
The central bank in Budapest will reduce the overnight deposit rate by a full percentage point to 16% on Tuesday, according to all eight economists surveyed in a Bloomberg poll. The decision, along with fresh inflation projections, will be communicated in a statement and a press conference at 3 p.m. local time.
In a possible preview of the move, policymakers reduced the top-end of their interest rate corridor by 100 basis points to 18.5%. They also kept the base rate, which has become secondary to the key rate, at 13% as expected.
The monetary authority cut the overnight rate for the first time in three years in May, as it began to dismantle a monetary regime aimed at halting a selloff in the forint and reining in record inflation. The central bank cited a “persistent improvement in risk perceptions” behind the move.
The National Bank of Hungary will likely stand by its goal of aligning the overnight rate with the base rate, “with an emphasis on gradual” easing, Georgi Deyanov, a Morgan Stanley analyst, wrote in note.
Hungary has been struggling with a recession and the highest borrowing costs in the EU. Inflation on an annual basis has slowed for four months but still exceeds 20% while the forint has gained 7% against the euro since the start of this year.
(Updates with base rate and interest corridor decisions in third paragraph.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.