Anticipating the National Bank of Hungary's Continued Easing Cycle: A Preview of Expected Rate Cuts
Aa
Share
National Bank of Hungary Preview: Systematic easing continues
The National Bank of Hungary’s easing cycle is subject to conditions, and we still see a good enough constellation for the rate cuts to continue. We see a “copy-paste” decision, meaning the effective rate moves lower to 16%.
Our call
We expect the National Bank of Hungary to continue its systematic easing which started with a symbolic step in April and the first effective rate cut in May. We believe that the circumstances are right for the Monetary Council to vote for another cut in the effective interest rate (quick deposit tender rate) by another 100bp, replicating the decision seen in May. This will put the effective rate at 16%. Alongside that – just to fully emulate the previous move – the top-end of the interest rate corridor will be lowered by 100bp as well to 18.5%.
The main interest rates (%)
The rationale behind our call
The central bank has given markets a fairly concrete guide regarding the conditions to continue rate cuts. Having reviewed these, we think the upcoming decision seems clear. The current account and trade balance indicators continue to be a focus of attention, and we have seen a further improvement in the last month. This has been accompanied by an improvement in the terms of trade as well.
CEE currencies vs EUR (end 2022 = 100%)
