Dovish NBH signals herald new rate cuts, says City
London (MTI) – Dovish signals from Hungary’s central bank are heralding a new rate cutting cycle, London-based emerging markets economists said on Wednesday.
In a report highlighting key findings of a recent visit to Hungary, analysts at BofA Merrill Lynch Global Research, the London-based research unit of Bank of America-Merrill Lynch, said these signals led them to pencil in a further 35 basis points in benchmark rate cuts this year to 1.00 percent.
“We think the NBH is sensitive to a stronger forint amid appreciation pressures from upcoming ECB quantitative easing, and on top of Hungary’s robust balance of payments positions (…) Our Budapest visit suggests that timing of the rate cuts depends highly on the market reaction following the 10 March ECB meeting”.
“Benchmark rate cuts could resume in the second quarter, in our view, in small steps of 10-15 basis points, totaling 35 basis points this year”.
However, a move as early as in March is unlikely unless a stronger than expected easing package by the ECB leads to the forint quickly trading well below 310 against the euro, Bank of America-Merrill Lynch’s economists said.