All members of Hungary's Monetary Council supported the reduction of the central bank’s base rate in April, the minutes of the council’s April 26 meeting, published by the Magyar Nemzeti Bank (MNB) on May 11, confirm.

Pushed by the fall back into deflation in March, as well as persistent appreciation of the forint, the the MNB moved to lower the benchmark by 15 bp to 1.05% on April 26, the second such cut in a row. However, the Monetary Council’s minutes reinforce the central bank’s earlier warnings against "exaggerated" expectations of monetary policy easing, and hint at the emerging trend for fiscal policy to take over responsability for stimulating the economy from monetary policy.

Members at the last meeting agreed that low inflation, the global interest rate environment, and the monetary policy of the European Central Bank, together with unused capacity in the economy, pointed to the need for further monetary easing. However, “several members emphasized the need for caution in relation to the extent of the continuation of the cycle”, the minutes show.

Members argued that stronger-than-expected increase in wages at the beginning of 2016 "was likely to warrant a more cautious monetary policy approach," while "greater focus in the budget on the stimulation of demand ... might play an increasing role in the closure of the output gap”.

Similar to the March 22 meeting, Janos Cinkotai again proposed a smaller (10 basis point) reduction, suggesting leaving time to see if the policy easing by the European Central Bank would have an impact on corporate lending. One member argued that the room for interest rate cuts was narrowing, while another suggested providing a “stronger signal” about where the interest rate cutting cycle would end, as market expectations were “excessively low”.

The MNB's Deputy Governor Marton Nagy – one of the nine members of the monetary council – recently said that “there could be one more step [but] further steps are doubtful”.