National Bank Of Hungary: Another 10bp Rate-Cut Seen Likely
- 25 Jun 2014 9:00 AM
Rate setters of the (NBH) are all but certain to slash the base rate by another 10 basis points at their next meeting, and the economy’s inflation indicators and external risk environment provides scope for more easing, London-based analysts said ahead of Tuesday’s rate-setting meeting. The expected 10-basis-point cut would bring the rate to 2.3%.
The easing cycle started in August 2012 with the last 10-basis-point cut administered on May 27. Forecasts for the terminal policy rate vary, however, ranging between 2.00% and 2.30%, with some analysts even seeing the risk of the NBH cutting below 2.00%. Analysts at Barclays investment group said the NBH’s base rate would bottom out at 2%.
“Hungary has slipped into a technical deflation territory”, and the “NBH is likely to use this as an excuse to cut interest rates deeper than we had previously expected,” they said. The European Central Bank’s monetary easing makes the Hungarian rate cuts even less of a problem for the forint as the ECB’s actions probably drive more portfolio money to neighbouring markets, they added.
JP Morgan emerging markets analysts said the easing would continue to “around 2%”. They said inflation was “tracking 0.8 percentage points below the central bank’s March projection. We look for inflation to accelerate to 2.5% next year from close to zero this year, remaining below the 3% target through end- 2015”.
Source www.hungarymatters.hu
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