William Jackson from Capital Economics thinks it is possible that MNB will opt for modifying its toolkit or adopting new solutions or possibly go for a mix of both options as the central bankʼs projections for inflation and economic growth are still too high.
Capital Economics predicts that Hungarian inflation in 2016 could be at 1.5% and economic growth somewhat below 2.5% in contrast to the MNBʼs latest prediction of 1.7% inflation and 2.5% economic growth.
Jackson noted that Capital Economics analysts were surprised the MNB only made small adjustments to its economic forecasts, but added that they do not expect a “dramatic” loosening of monetary policy as conditions are already extremely loose.
Capital Economics expects MNB will keep its base rate at 1.35% even for most of 2017.
Pasquale Diana at Morgan Stanley said downside risk was influencing the MNB. As MNB mentioned long-term yields in its statement, this suggests it wants to flatten the yield curve.
Morgan Stanley predicts only 1.4% inflation for 2016 and Pasquale Diana thinks the central bank could reveal its plans for unconventional instruments as soon as the first quarter of 2016.
Nicolaie Alexandru-Chidesciuc from JP Morgan restated they are still counting on MNB cutting rates from March 2016. The base rate could fall to 1% or lower then stay at that level until the end of 2017. JP Morgan expects Hungarian inflation to be at 1.3% in 2016.
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