Hungary's central bank cuts overnight deposit rates by 100 basis points

The Monetary Council of the National Bank of Hungary (MNB) announced a significant reduction in interest rates for overnight deposit tenders and foreign exchange swap tenders on Tuesday.

The MNB has revealed its decision to lower interest rates by 100 basis points, in order to anchor inflation expectations, and ensure a sustainable path toward the inflation target.

However, the base rate, a key benchmark, remained unchanged at 13.0 percent. This decision reflects a cautious stance amid global economic deceleration and potential inflationary pressures.

Inflation decelerated in Hungary in July, with consumer prices rising by 17.6 percent on an annual basis, compared to June's 20.1 percent. This was primarily attributed to the slowing price dynamics of processed foods and industrial products. Meanwhile, core inflation slowed across a broad range of products and services, with the indicator falling by 3.3 percentage points to 17.5 percent in July, the Monetary Council said.

Deputy Governor of MNB Barnabas Virag highlighted the prudence of the Council's decision, emphasizing that the 13 percent base rate effectively addresses risk management, supported by favorable market conditions.

"The adjustment in interest rates is set to reshape the monetary landscape, marking a new phase in Hungary's monetary policy framework," he said, adding that as the central bank's toolkit undergoes a simplification process, its focus remains steadfast on managing inflation.