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City sees continued, steady easing driven by economic gloom

  Hungary’s central bank is set to continue on a steady monetary easing path after Monday’s 50bps cut in its base rate as a pause might even cause more exchange rate volatility than further rate cuts amid the darkening growth outlook, London-based emerging markets analysts said.

Ralph Sueppel, Chief Economist for global emerging markets at BlueCrest Capital Management told Econews that neither the economy nor the markets will give the MNB much time to pause as there is ongoing relentless downward pressure on the economic growth and on the price dynamics.

“I expect both real economic data and inflation data to undershoot what most analysts and the MNB are (expecting) ... any central bank that is not reducing interest rates on time will be misinterpreted as condoning unduly tight monetary stance”. He said he would expect “at least” another 50bps rate cut next month, but “if (the MNB) wants to avoid currency volatility, it should probably reduce rates more”.

Juliet Sampson, Central European economist at HSBC in London also said that she can see the MNB cutting its base rate by more than 50bps next month if the market seems “particularly stable” until then. Even Monday’s easing was likely kept to 50bps only by the weakness the forint has seen in the past couple of weeks, she added. She said she saw the MNB lower its interest rate to 5% by end-2009 should stable market conditions prevail. (MTI-Econews)