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City: Better-than-expected CPI leaves MNB more room for rate cuts

  Better-than-expected November CPI data published Thursday morning leave the National Bank of Hungary with more room for rate cuts, City analysts told Econews correspondent in London.


Twelve-month consumer prices rose 4.2% in November, the Central Statistics Office (KSH) said on Thursday. London-based emerging market analysts had earlier put the headline figure at 4.6%.

Nicholas Kennedy, 4castweb’s economist for Central Europe, attributed the slowdown in inflation to falling oil prices as well as favorable prices for food and services, with the exception of centrally-regulated service prices. He said CPI was likely to fall to 3% -- the MNB’s mid-term “price stability” target -- already in the H1 of 2009.

The MNB will probably cut rates again at a meeting on December 22 after making a surprise 50bp rate reduction to 10.50% on December 8, he added. Christine Li, of Moody’s, put the MNB base rate at 7.00% by end-2009. Moody’s sees Hungary’s CPI slowing to 3.5% in H2 2009, she added.

Merrill Lynch projects Hungary’s base rate will be lowered as far as 5.50% in 2009. Ralph Sueppel, of BlueCrest Capital Management, also sees the base rate falling another 5-6 percentage points within a year. (MTI-Eco)