Today's Monetary Council meeting went pretty much as expected

HUNGARY - In Brief 17 Dec 2024 by Istvan Racz
Actually, it went almost exactly as analysts, nearly in unison, predicted on Portfolio.hu yesterday. 1. The base rate was kept unchanged at 6.5%. A 'great majority' of the Council voted for holding the rate, meaning that there was one vote for a small rate cut, just as it happened in November.2. The Council stressed that the base rate may remain unchanged even for a longer while if the inflation environment and external risk factors require.3. The Q4 inflation report, to be released in full on Thursday, revised the average CPI-inflation forecast for 2025 upwards, from 2.7-3.6% to 3.3-4.1%. The Council stressed that now they expect the headline rate to return to the 3% target level on a sustainable basis only in 2026. However, they also stressed that they expect the headline rate to stay within the 2-4% tolerance band 'for most part of 2025'.4. The inflation report has cut back the Bank's GDP growth forecast only moderately, to 0.3-0.7% for this year and just marginally, to 2.6-3.6%, for 2025. A new element is the MNB's updated short-term, monthly and then quarterly, inflation forecast, detailed by the following chart (headline rate in red, core inflation in dark blue): The MNB will hold extraordinary discount bond and reverse FX swap auctions tomorrow, with maturities extended into early 2025, for a smooth year end on HUF markets.

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