Hungary may well see another rate cut at this month’s regular Monetary Policy Council meeting even after a surprise 50bps easing announced on Monday, London-based emerging markets analysts said.
The MPC surprised the markets by moving to lower its policy rate to 10.5% at an originally non-rate setting meeting on Monday, the second 50bps rate cut since the 300bps hike in October.
Christian Keller, Central European economist at Barclays Capital in London told Econews that the October rate hike was an emergency move, and its reasons were removed by the IMF-World Bank-EU financial package. Additionally, the currencies of emerging Europe are holding up well, and the MNB is probably seizing upon this opportunity as well, he said. Asked where Monday’s move leaves the chances for another rate cut at the regular rate setting meeting due on December 22, Keller said he wouldn’t rule out another 50bps cut. He said he saw MNB’s base rate easing to 7.00% by end-2009, and to 6.00 by end-2010.
Ralph Sueppel, Chief Economist and Strategist for Global Emerging Markets at BlueCrest Capital Management in London told Econews that “everyone is reducing interest rates quite quickly” in response to the collapse in global commodity prices, so in a European context the Hungarian interest rate cut is “no surprise”. Sueppel said another easing at the regular December meeting is “possible”. In accordance with the weakening of the European manufacturing cycle, “a lot more rate hikes have to come”.
Asked if the anticipated and probably aggressive further rate cuts by the ECB might have already been a factor in what the MNB has recently been doing, Sueppel said “absolutely ... we have a European rate cycle (where) the ECB sets the tone”. It also provides the basis for the FX carry trade and it gives all the Central Europeans leeway to reduce interest rates by themselves, he added. Asked about the possible monetary path of the MNB going forward, Sueppel said Hungarian rates can fall another 500-600bps. (MTI-Eco