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City sees further rate cut a possibility

Recent market volatility has made Hungary's next rates decision a “close call”, but a window of opportunity for further easing by the MNB still seems to be open, London-based analysts said prior to today’s policy-setting meeting.

JP Morgan's analysts said that their base case is for the MNB to pause. However, “we see the odds of a cut as high as 40% ... we anticipate that 3 out of 7 council members will opt for a 25 bp cut, with (Péter) Bihari likely to swing the vote in favor of no change”.

In a separate forecast, Barclays Capital said the MNB's rate decision “will be a very close call”. While HUF assets have seen a recovery in recent days, market volatility remains high and the new Fidesz government, taking office this week, has made “ambiguous statements on fiscal policy and aggressively criticized the MNB”.

Although “we believe the MNB will probably continue to lower its policy rate as inflation is set to decline further, it may decide to keep rates on hold in the current situation, possibly restarting cuts in July if the global and domestic situation becomes clearer”, Barclays Capital said. (MTI - Econews)