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Analysts: MNB likely to resume rate cuts this year

EU

Photo by Jessica Fejos

The Monetary Policy Council (MPC) of the National Bank of Hungary (MNB) is likely to embark on a new rate cutting cycle this year on the back of a deteriorating growth backdrop and persistently low inflation, London-based emerging markets economists said yesterday.

(Photo: Jessica Fejos)

In a research note released to clients in London, Commerzbank said that their cyclically-based forecast is for Hungarian GDP growth to decelerate to 2.2% this year. Additionally, “we forecast core inflation to moderate further ... We expect the MNB to lower inflation projections noticeably in March”.

At the EU level, “we expect the ECB to revise down inflation forecasts sharply in March, which will clear the way for further monetary expansion”.

Against this backdrop, “we expect the MNB to cut its benchmark rate from 1.35% to 1%”.

At present, the MPC has stated that the policy rate will be left unchanged for a protracted period. However, “we question why the MNB would not cut rates to maintain the current level of real interest rate after it too has lowered inflation projections”, Commerzbankʼs analysts said.

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