Central Bank’s Surprising Move Boosts Forint Strength
Hungarian central bank cuts base rate by 75 basis points, experts expected a larger cut
During Tuesday’s regular policy meeting, the Hungarian central bank, Magyar Nemzeti Bank (MNB), announced a 75 basis point cut in the base rate, bringing it down to 10.00%. This reduction was lower than what experts had anticipated, as they believed the cut would reach 100 basis points.
The decision comes after the national bank had previously mentioned a 100-basis-point cut for January. Additionally, the forint had struggled on Monday after the European Union threatened Hungary with new economic sanctions unless Prime Minister Orbán voted for Ukraine’s financial aid. As a result, the forint hit the 390/EUR level, an unprecedented low since last autumn.
However, after the MNB’s announcement, the forint began to strengthen. By the afternoon, thanks to the lower base rate cut, the forint had strengthened to 387/EUR, a significant improvement from the morning’s 389.4/EUR.
In addition to the central bank’s rate cut, Prime Minister Viktor Orbán made headlines when he accused the EU of blackmailing member states who diverge on issues such as war, migration, and gender. Orbán stated that Hungary offered to compromise on Ukraine’s financing, but this was not well received by other member states. He argued that Hungary’s opposition to certain measures was about maintaining EU unity, not about blackmailing the bloc with a veto.
Orbán also criticized the EU for becoming increasingly imperialist and engaging in an ideological war against Hungary. He dismissed the complaints about Hungarian migration and gender policies as having nothing to do with corruption or the quality of justice.
The prime minister also addressed the possibility of Hungary losing its voting right in the European Council, stating that it would only be possible in the case of a rule-of-law violation and not related to the Ukraine issue.
Orbán emphasized the importance of the upcoming European Parliament elections and suggested that Europe could benefit from the re-election of Donald Trump, as he believes the basis of decision-making in international politics should be the national interest.
Overall, the rate cut by the Hungarian central bank and Prime Minister Orbán’s statements have brought attention to the ongoing economic and political developments in Hungary and the broader European context.
