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Nomura: no rate cut expected after SNB announcement

The National Bank of Hungary (MNB) is not expected to cut its base rate after the announcement of the Swiss National Bank this morning to buy "foreign currencies in unlimited quantities", Nomura International analyst Peter Attard Monalto said in a research note sent to the Budapest Business Journal on Tuesday. 

The MNB makes a very clear separation in currency move terms between risk premia, which is related to the EUR/HUF rates, CDS and basis in their minds and growth, which is related to the CHF/HUF rate, Monalto said. In addition, the SNB’s move makes households slightly less far underwater. He noted that any positive development to households is more than offset by weaker external dynamic going forwards and the recent very weak growth numbers, which keep the financial stability and balance sheet risks still alive. 

The MNB is still too concerned by the eurozone crisis to move rates, this is their primary driver for rates unchanged, Monalto said. He pointed out that the MNB didn't cut the base rate before, even when the CHF/HUF rate was below their key 240 danger level.

With the basis still outside -100, the CDS still over 300 and EUR/HUF still above 265 area, Nomura does not see the MNB cutting rates and still see rates on hold for the next year with a monetary Council “paralysed” in a 'do no harm' mentality.