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Hungary central bank may opt for new rate cut next week, says City

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Hungary's central bank may opt for a new rate cut next week after an unexpected 25bp easing in August, London-based emerging markets economists said in an Econews poll prior to the Monetary Policy Council's meeting next Tuesday.

Analysts at 4cast, a major London-based financial consultancy, said that once the external MPC members decided to assume the risk of "an unhappy 4:3 vote (in August), the ice has been broken, a precedent has been made". Thus, more rate cuts could come in further tight votes, despite the opposition of the three internal members and despite the fact that the upcoming CPI report in September may not unambiguously support the case for monetary easing. Accordingly, "we expect rates to be trimmed by another 25bp in September".

It seems the MPC may cut further in the coming months, even without a deal with the IMF, unless the external backdrop suddenly deteriorates, they said.

Obviously, "an unexpected agreement with the international lenders" could speed up the process of easing.

At the same time, the message of the tight vote and the discord within the MPC "will continue to stay on the back of the minds of many (investors), and in an adverse external backdrop it may serve as an argument to inflate any potential bearish momentum", 4cast's analysts said.

Emerging markets economists at Morgan Stanley said on Friday that "while very likely to be a close call (4-3), we expect another 25bp cut at Tuesday's meeting".

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