Analysts expect MNB to cut base rate sharply below 1%

Sights

pixabay

Hungaryʼs policy rate is now likely to trough sharply below 1% as the central bank started its new easing cycle earlier than expected and demonstrated an explicitly dovish stance, London-based emerging markets economists said yesterday, according to Hungarian news agency MTI.

Analysts at JP Morgan said they now see the decision to cut the base rate by 15 bps to 1.2% this week as the first cut in a new rate-cutting cycle likely to last at least four-five months.

“It now looks to us like the MNB is aiming to sharply lower the policy rate. ... We therefore change our call for base rate cuts to 0.5% or lower from 1% or lower than we previously had.”

The pace of cuts will likely remain in steps of 10-15 bps, with a final cut of 10bp in August.

“While we previously expected at least 35 bps of rate cuts in this easing cycle, we now expect at least 85 bps of rate cuts,” including the 15 bps cut delivered this week, JP Morganʼs analysts said.

Economists at Morgan Stanley also said that as the cuts to the policy rate had come “a bit earlier” than they envisaged, and the clear dovish tilt to the MNB statement put the risks to their second-quarter target for the policy rate to trough at 1% to the downside.

Such a dovish playbook will serve the MNB well this year, but may well prove challenging when inflation turns. Easy global monetary conditions have made the MNBʼs job easier, but the economy has recovered, the labor market is tightening, core inflation is around 1.5% and house prices are firming. “Itʼs only a matter of time before inflation complicates the MNBʼs ultra-dovish stance,” Morgan Stanleyʼs London-based analysts added.

Number of Thefts in Capital Edges Higher in 2023 Figures

Number of Thefts in Capital Edges Higher in 2023

Magyar Drops Audio Suggesting Gov't Meddling in Corruption C... Government

Magyar Drops Audio Suggesting Gov't Meddling in Corruption C...

Wizz Air Using VR for Pilot Training Innovation

Wizz Air Using VR for Pilot Training

2024 Edition of Budapest Ritmo Approaching In Budapest

2024 Edition of Budapest Ritmo Approaching

SUPPORT THE BUDAPEST BUSINESS JOURNAL

Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.