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Nomura: MNB could cut base rate again

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Although the National Bank of Hungary’s (MNB) Monetary Policy Council (MPC) did not cut the base rate yesterday, but kept it at 1.35%, the central bank is “making step-by-step moves towards cutting rates, now extending forward guidance for rates to remain unchanged to the end of the forecast horizon”, analysts of Japanese Nomura said in an announcement issued today.

Analysts say that the statement on the MPC meeting issued by the central bank on its website “was surprisingly short” and oddly “no reference was made to the overnight deposit or penalty lending rates”.  The analysts noted that “normally, a PDF is on the website confirming what all the rates are. This opens the risk of a cut having been decided and announced only after the auctions later in the week, just as last time.”

“There was further reinforcement of the forward guidance, added at the last meeting, for the first time. The extended period has existed for some time, but now they have tried to massage rate markets (deliberately from the detailed discussions of the last meeting’s minutes) through the deliberate placement of words,” Nomura says.

Analysts of Nomura added that they believe “the changes at the start of this paragraph are also significant, showing the weight put on the projections. We believe they are doing this deliberately, given the downside risks to the forecast and the chances of it falling out of the bottom of target sometime next year, as our forecast now anticipates.”

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