“Political noise” over the position of MNB Chairman András Simor may eventually lead to the easing cycle coming to a halt, London-based emerging markets analysts said on Tuesday.
Barclays Capital, a major City-based investment banking group has launched an “MC tracker” for Hungary, systematically comparing the language used in successive statements released by the Monetary Council after its monthly rates meetings.
In the latest edition released on Tuesday, a day after the MNB slashed another 25bps off its policy rate to bring it to a new historic low of 5.25%, Barclays Capital said that while last month “we had found that significant language changes had been introduced into the statement, signaling greater confidence in further rate cuts ... yesterday's statement does not indicate much change”.
Barclays Capital's note highlighted, however, that “today, Fidesz's vice chairman (Zoltán Pokorni) came out openly asking Governor Simor to resign ... it seems that local rates have already reacted to this”.
“We think the MNB will not respond to the political attacks, but if the political 'noise' continues to add risk premium back to HUF assets, the MC has a reason to halt the easing cycle ... We will follow the process closely”.
Barclays Capital said it did not think that “a new Fidesz-picked governor” would necessarily implement any unorthodox monetary policy. But given the confidence markets seem to have in the current MNB management, any forced change to this could trigger volatility and, as a result, halt the cutting cycle, Barclays Capital added. (MTI-Econews)