2.5% base rate

In line wit140430_Alapkamat_ENh expectations, the Monetary Council of the MNB cut the base rate to 2.5% – a new historic low. The cut had been suggested by very low inflation (0.1% y-o-y in March), still sluggish (although in annual average accelerating) economic growth, and relatively modest financial market risk premiums. The question is what next, and the communique of the Council appears to be indecisive in this respect. We expect no more rate cut with the current rate staying unchanged in the rest of the year. For 2015, we forecast 50bps rate hike, resulting in 3% base rate in December 2015.