Hungary Base Rate

The central bank of Hungary cut its key base rate by 75 bps to 10.75% during its December 2023 meeting, in line with market estimates, as inflation continues to ease. The rates on collateralized loan rates and overnight deposits were also reduced by the same margin, reaching 11.75% and 9.75%, respectively. Still, the central bank continues to resist government pressure for more substantial rate cuts to bolster the economy. In November, consumer prices rose by 7.9% year-on-year, marking the smallest increase since January 2022 but remaining significantly above the central bank's midpoint target of 3%. The regulator foresees a gradual decline in inflation, expecting it to reach around 6% by the end of 2023 and return within the acceptable range by 2025. Looking ahead, policymakers are anticipated to maintain the current pace of rate cuts, considering the ongoing risks of an economic downturn in the country.