Nomura: Hungary’s central bank could cut further

Analysis

The Hungarian central bank appears to be less dovish than expected, which could signal that the easing cycle has not yet reached its end, and one more cut could be on the horizon, analysts at Japanese Nomura said in reaction to the National Bank of Hungary’s (MNB) base rate cut yesterday.

The Monetary Policy Council (MPC) of the MNB yesterday decided to “cut the three million depo rate and the O/N borrowing rate by 15 bps as expected, but kept the O/N depo rate unchanged contrary to our expectations of a 5 bps cut”, Nomura analysts commented. 

Nomura analysts “cognizant of the MNB’s desire to surprise markets” said they “see no reason yet to change our view of 2 x 15 bps more in cuts over the next two meetings”.

Restating their earlier opinion, Nomura analysts said “the problem with the MNB … is that its communications strategy is too ‘cute’ … it is attempting to shift markets into a position where they can be surprised by the over-delivery of cuts in order to weaken the currency”. Nomura analysts added that “the leadership of the MNB has been increasingly open about being happy to surprise markets though aware it cannot do it too often.”

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