Door now wide open for rate cuts in Hungary

Hungary’s central bank had already been inching towards reducing interest rates and the big downside surprise in the May inflation figures has prompted us to pencil in a larger 50bp cut (to 5.75%) at the MPC meeting later this month. More broadly, the region is one part of the global economy where monetary policy will be biased towards easing. Soft inflation figures have reduced pressure on policymakers in Poland and Czechia to hike (although next week’s Czech rate decision will be a close call), while rate cutting cycles in Russia and Israel have further to run.