Dep. gov. reiterates need for MNB to reassess easing


National Bank of Hungary (MNB) rate-setters will have to “reassess” the continued easing and concomitant lowering of its base rate in light of the changing situation on global financial markets and in Ukraine, MNB deputy governor Ádám Balog stated on TV station M1 this morning. 

Balog characterized Hungary’s financial standing as “stable” in terms of inflation, but noted unfavorable changes on global markets and said the situation in Ukraine “does not help us” – generally direct echoes of comments by Monetary Council member Gyula Pleschinger, who has recently consistently voted for more conservative cuts to the base rate, earlier this week.

Last week, Balog had stated at a business conference that factors affecting emerging markets must be factored into the MNB’s rate-setting decisions in the near future.

The MNB Monetary Council continued in February an easing cycle begun over 18 months ago. With the base rate now at 2.70%, many analysts expect the cycle to be close to an end.

Earlier this week, however, at least a pair of high-profile predictions had the council stubbornly continuing cuts to the base rate, even to extreme levels.

The surprising reportage of 0.1% consumer price inflation for February precipitated JP Morgan analysts to “clearly support” the MNB’s plan to ease further, reckoning 10 bp cuts for both March and April.

Further, both JP Morgan and Goldman Sachs “expect annual inflation to accelerate from here.” The latter also figures the base rate will soon be dropped to 2.50%, but perhaps as late as June -- “But the rate outlook still ultimately depends on market conditions, with a more stable forint and bond demand necessary” to allow further rate cuts.


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