Equilor expects easing cycle to end

MNB

The further base rate cut by the Monetary Policy Council of the National Bank of Hungary (MNB), which eased an additional 15 bp to 1.35%, counters earlier expectations of analysts, Equilor said in a press release today. Equilor expects this cut to put an end to the easing cycle started in March.

According to Equilor, this morningʼs announcement that MNB governor György Matolcsy will be holding a press conference today from 2:30 PM, signals that this could be the last cut of the easing cycle.

The end of the cycle can be justified by the recently growing inflation indices and discount as compared to the Polish base rate of 1.50%, Equilor said in the press release. The press release added that yesterday investors were calculating with a base rate of around 1.30% at the lowest.

As Equilor anticipates that this will be the end of the easing cycle, they do not expect the Hungarian forint to weaken, and see the exchange rate of EUR/HUF remaining around 305-315.

"In the Council’s assessment, the policy rate has reached the level which ensures the medium-term achievement of the inflation target and a corresponding degree of support to the economy," the rate-setters said in a statement after the meeting, thereby signaling an end to the easing cycle.

According to Hungarian news agency MTI, the Council said inflationary pressures are "likely to remain moderate" as the output gap closes "only gradually". It also noted that a "cautious approach" to monetary policy was warranted because of "uncertainty in the global financial environment". 

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