(Bloomberg) -- Hungary’s central bank signaled it plans to reduce its key rate on as many as three occasions in the remainder of the year, with a cut already this month under consideration following softer inflation data.
Deputy Governor Barnabas Virag reiterated calls for cautious, patient monetary policy in the face of remaining inflation risks in a speech Monday. Yet he added that the improvement in global risk sentiment and the consumer price index coming in within the target band will probably still leave room for cuts following more than a year of uninterrupted monthly easing steps.
The central bank said in June that it was entering a new phase in monetary policy, with much less room for further rates cuts, after bringing the key interest rate to 7% from 18% a year earlier.
Policymakers have progressively reduced the size of the rate cuts this year, to just a quarter-point in June. The central bank is expected to consider a 25 basis-point cut or a pause when it next meets on July 23.
“The latest better-than-expected inflation data and improving global risk sentiment don’t change the monetary-policy assessment but do make it possible to deliver interest rate cuts earlier,” Virag said in an online presentation.
The forint gained 0.1% to 391.57 per euro by 3:22 p.m. in Budapest.
The central bank’s forecasts show that headline inflation will remain around 4%, the top of its tolerance band, in the second half of 2024, Virag said. At the same time, the country needed more time to anchor inflation expectations, which also means that rate-cut bets over the next two years were probably excessive, he said.
Money-market traders began pricing in a slightly higher chance of easing in the coming months after the publication of June inflation data, forward-rate agreements show.
©2024 Bloomberg L.P.
