2.4% base rate

140527_Alapkamat_ENAs expected, the Monetary Council of the MNB cut the base rate by 10bps to 2.4%, a new all-time low and, interestingly, to below the Polish 2.5% policy rate. This has not happened since 2003. It seems that the extraordinarily low inflation rate provides room for further monetary easing: we expect the base rate to touch 2.2% by the year-end. However, it is seen to rise to 3% by December 2015 as a result of accelerating economic growth and inflation. The forint effectively did not react to the decision.