Nomura: Despite MNB claims, more interest cuts due

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Although National Bank of Hungary’s (MNB) Governor György Matolcsy said yesterday that the surprisingly high cut rates of 20bp are likely to be the last one for this and the next year, analysts at Normura speculate the opposite.

Unless the inflation outlook changes markedly, base rates should remain unchanged until the end of the next year, the MNB chief said. But according to a press release from Nomura: “We do not believe this and maintain our view that the MPC will assess risk premia meeting by meeting and cut if it thinks it can get away with a little bit more, maybe after a pause next month.”

Nomura analysts noted that the “exact same situation” happened on the approach to the 2.50% base lending rate. The MNB “communicated to the market that it was a natural base to stop in view of market sentiment and the CPI outlook, but then as the CPI outlook improved further ... the MNB cut further.” According to Nomura’s experts, the same thing could happen again.

Nomura speculates the consumer prices will continue to fall in August, which could force the central bank to cut further.

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