London analysts: MNB may resume rate cutting cycle in March

Analysis

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The National Bank of Hungary (MNB) may resume its rate cutting cycle as early as March, London-based analysts said yesterday, according to Hungarian news agency MTI.

Analysts at JP Morgan said they are expecting the MNB to cut its base rate from the current 1.35% by 15 bps to 1.20% at its next rate-setting meeting in March. By the end of the rate cut cycle the central bankʼs base rate could be as low as 1%, although the analysts noted that there were uncertain factors in this projection.

JP Morgan analysts highlighted that the Monetary Council, in its statement following Tuesdayʼs rate-setting meeting, said they may ease monetary conditions in view of the March Inflation Report, while leaving out previous references that the preferred method of easing was through the use of non-conventional means.

Analysts at Goldman Sachs also noted the absence of a stated preference for non-conventional means for monetary easing, taking it as a sign of an unexpected softening of MNBʼs position. Goldman Sachs believes that the Council is planning several rate cuts.

Capital Economics analysts also interpreted the Councilʼs Tuesday statement that they have begun preparations for a rate cutting cycle that could see the base rate fall to 1%.

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