Last month, it reduced the top of its interest rate corridor, a first step that could lead to a cut in its key 18% one-day deposit rate. The bank has said it will be watching the risk environment in deciding on next moves. April inflation data will not deter rate setters from considering easing policy even from this month, ING economist Peter Virovacz said. "The main factors regarding the one-day deposit rate are market turbulence, external balance, the stability of the forint and market interest rate expectations, so today's data only has an indirect impact," he said. "Had we seen a higher-than-expected print with a bad composition, that would have raised doubts in the market." The data showed food prices rose by 37.9% year-on-year in April, outpacing gains in most other European countries, and household energy prices jumped by 41.8% after the government curtailed utility bill subsidies last year.
The Hungarian central bank has come under pressure from the
government to begin easing policy to help an economy that was in
recession in the last half of 2022 and remained sluggish to
begin 2023.
March data released last week showed a large drop in retail
sales as double-digit inflation continued to cut demand and hit
household budgets.
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(Reporting by Jason Hovet in Prague and Gergely Szakacs in
Budapest; Editing by Christina Fincher)
