Analysts: MNB rate cuts still possible this year

Analysis

Image by Jessica Fejos

Hungaryʼs central bank may embark on a new rate cutting cycle this year amid floundering growth and inflation prospects, London-based emerging markets economists said on Friday.

(Photo: Jessica Fejos)

In its weekly “CEEMEA Compass” report on emerging markets, released to clients in London, Morgan Stanley said it sees growth reaching 2.2% this year, after being at 2.6% in 2015, which is “somewhat lower than in our previous forecast (of 2.9%)”.

“Hungary continues to enjoy a recovery in domestic demand from depressed levels, but it has somewhat less momentum than we anticipated”, Morgan Stanley analysts noted. 

“The MNB has in the past often revisited its monetary stance in the face of new information... and oil futures are almost 20% lower than at the publication of the last Inflation Report, and December inflation at 0.9% is tracking below the MNB estimates”.

Although cuts in the base rate “seem to have gone out of favor, they certainly remain possible, in our view, though January seems way too soon... We still forecast the policy rate at 1% by mid-year from the current 1.35%”, Morgan Stanleyʼs analysts added.    

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