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Investing.com -- The Hungarian central bank (MNB) has decided to keep its base rate steady at 6.50%, in a move that aligns with its cautious stance on monetary easing due to concerns about inflation risks. This marks the fourth consecutive meeting where the MNB has opted to maintain the same base rate.
The headline inflation rate in Hungary has been on an upward trend, rising from 3.2% year-on-year in October, to 3.7% in November and reaching 4.7% in December. This increase in inflation has been a significant factor in the central bank's decision-making process.
Deputy governor Virag of the MNB has indicated that the bank's policymakers will continue to adopt a cautious approach to monetary easing. He referred to the December inflation figure as a "warning sign" and reiterated the concerns of the policymakers about the increasing inflation expectations.
Analysts at Capital Economics predict that the MNB will continue to pause its rate changes due to the potential inflation risks from strong wage growth and the possibility of the Hungarian forint coming under pressure due to challenging external financing conditions.
They forecast that the next interest rate cut will not occur until mid-2025 and anticipate a total of 100 basis points of easing for this year. This perspective is more hawkish than the current consensus.
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