Market expects Hungary's central bank to slow monetary easing pace in January.

By bne IntelliNews January 20, 2014

The Monetary Council (MC) of Hungary’s central bank is expected to cut the base interest rate by 10bps to a new record low of 2.90% at its next rate setting meeting on Tuesday (Jan 21), the majority of analysts polled by portfolio.hu said.

However, respondents were fairly united about the size of the rate cut, with only two out of eleven expecting the central bank to keep monetary easing pace with a 20bps cut.

In a Reuters poll, 16 of 20 analysts expect a 10bps cut and four projected a 20bps cut.

The Council cut the base rate by 25bps in each of its monthly rate-setting meetings for twelve months from August 2012 until last August, when it started making 20bps reductions each month. The council’s decision to cut the base interest rate by 20bps to a new historic low of 3% at its meeting on December 17 was approved with the votes of seven members, while two voted in support of a 10bps rate cut.

The rate setters concluded that further cautious easing of monetary conditions might follow, considering the outlook for inflation and the real economy and taking into account perceptions of the risks associated with the economy. They agreed that the pace of monetary easing could be slowed down.

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