MNI CNB Review - May 2025: Nearing Touch Down

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Executive Summary:

• The Bank Board voted 6-1 to deliver a “very cautious” 25bp cut.
• Risk assessment was changed from ‘inflationary’ to ‘modestly inflationary’.
• Board members did not reach consensus on whether it was the final cut in this cycle.

A majority of six out of seven Bank Board members backed a 25bp cut to the two-week repo rate, outvoting a dissenter calling for a hold. This brings the main policy rate to 3.50%, the upper end of the range of estimates of its neutral level, suggesting that the rate-cutting cycle is drawing to an end. Manageable domestic inflation and a decline in imported inflation risk were cited as main reasons behind the decision, although a familiar list of risks continues to limit the room for any further easing. Despite some of the rhetoric being perhaps less hawkish than expected, we think that the CNB will tread with growing caution as the rate-cutting cycle seems to be entering its terminal phase.