Yet another base rate cut

The Monetary Council of the MNB cut the base rate by yet another 20bps in line with market expectations. The 3,6% new base rate is a new historic low. According to the MNB, both external and internal economic developments ma130924_alapkamat_ENde possible and required yet another move of monetary easing. Moreover, as global financial markets are expected to stabilize whereas the negative output gap is to continue to characterize the Hungarian economy, the Council foresees further careful easing steps. What exactly this means is of course cannot be told. Yet, if the Fed decides to start tapering off QE3, that will pose an effective limitation on further monetary easing in Hungary in our view.