Commerzbank: MNB rate cut an orchestrated surprise

Analysis

Image by Jessica Fejos

The National Bank of Hungary’s (MNB) surprise move yesterday of sharply lowering inflation forecasts and cutting base rates for the first time since last summer’s easing cycle was effective in catching the market off guard, according to a press release issued by Commerzbank yesterday.

After signaling that any additional monetary easing would take place using unconventional tools, the MNB followed with a surprise cut yesterday to the base rate of 15 basis points to 1.2%.

“The central bank changed its signaling quite quickly, and then followed up with actual rate cuts even before the consensus had fully appreciated that rate cuts were coming – this will likely also boost the efficacy of the policy. But, crucially, the central bank averted falling seriously behind the curve,” the Commerzbank analysts said, adding that it was surprised to see the MNB react so quickly.

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