MNB cuts base rate to 3.4%

The Monetary Council of the MNB, in line with our expectation and the market consensus, cut the base rate to 3.4% – a new historic low. As the move131029_MNB_alapkamat_EN fulfilled market expectations it did not trigger any sharp investors’ reaction. The Monetary Council believes that inflation remains moderate on a mid-term horizon that justifies loose monetary conditions. Hence, “considering the outlook for inflation and the real economy and taking into account perceptions of the risks associated with the economy, further cautious easing of monetary conditions may follow” – says the communique of the Council. This appears supporting our view that by the year-end the base rate is likely to be cut by another 30 basis points all together.