London analysts: Unconventional tools ‘not enough to stabilize HUF’ at competitive levels
Unconventional monetary policy on its own will probably not be powerful enough to stabilize the forintʼs exchange rate at a competitive level, and the central bank is likely to have to resume its rate cutting cycle soon, London-based emerging markets economists said yesterday, according to Hungarian news agency MTI.
In its daily Global Macro update, released to clients in London, Barclays said it now forecasts an additional interest rate cut of 25 bps in the second quarter from the current 1.35%.
The forint has appreciated significantly against the euro since the beginning of the year. This probably reflects the fact that the MNB left monetary policy unchanged in response to the ECBʼs easing in December. If sustained, this could hurt growth and make it difficult to reach the inflation target in the medium term, Barclays said.
“We anticipate that the ECB will ease policy further and this is likely to put additional (appreciation) pressure on the HUF against the euro, in line with the most recent experience”, it added.
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