MNI: US HOUSE FINANCIAL SERVICES ANNOUNCES HEARING ON SVB, SIG

MNI BRIEF: Canada Feb Teranet Home Price Index Record -11% YOY

MNI China Daily Summary: Friday, March 17

MNI DATA FORECASTS: Fed, BOE To Lead

Fed Watch

MNI: US FEB INDUSTRIAL PROD +0.0%; CAP UTIL 78.0%

MNI BRIEF: Fed, Treasury, FDIC-Big Banks Back First Republic

MNI BRIEF: Trudeau Justified Using Emergency Act, Judge Finds

MNI: Canada Boosting Health Spending CAD46.2B Over 10 Years

© 1982-2023 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

MNI: US HOUSE FINANCIAL SERVICES ANNOUNCES HEARING ON SVB, SIG

USDCAD TECHS

Pullback Considered Corrective

AUDUSD TECHS

Corrective Cycle

EURJPY TECHS

Corrective Bounce

US

US Voters Support Bank Rescue Measures But Consider It A "Bailout"

USDJPY TECHS

Short-Term Trend Needle Points South

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access
Trending Top 5
Market News Topics

JP Morgan View: See 100bp of Cuts in March Alongside New Forecasts

HUNGARY
BulletEM BulletEmerging Markets NewsHomepage
  • JP Morgan estimate the increase in RRR to 10% from 5% will drain some HUF1.5tn worth of liquidity. But even with another HUF1.5tn being drained, excess liquidity will likely remain somewhere around HUF7tn. In terms of distribution, most excess liquidity sits at the one-day depo facility (paying 18%), whereas the other HUF2.1tn is in 2-month deposits (17.95%).
  • The combination of high rates and huge amounts of excess liquidity in the banking has placed the NBH’s P&L under pressure. One advantage of increasing RRR, from a P&L perspective, is that it pays the base rate, which is currently 13% and significantly lower than the marginal rate (18%). By increasing the share of lower-paid reserves the NBH can save, all else equal, some HUF56b or nearly 0.1% of GDP. JP Morgan consider the weight of sterilization costs on the P&L to be an increasing concern to the NBH, and an extra incentive to ease policy this year (and/or change conditions on RRR).
  • JP Morgan expect a 100bp cut to the 1-day depo in March, expecting inflation (both headline and core) to peak in February/March. Given that March is accompanied by a new forecast and new inflation report, JP Morgan are inclined to think that’s when the first move will occur.
  • They forecast that core CPI will fall to 12% by the end of this year, and hence in terms of magnitude, they cannot envision the cycle going much beyond 13%, which is the value of the base rate.
243 words

To read the full story

Why Subscribe to

MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
  • JP Morgan estimate the increase in RRR to 10% from 5% will drain some HUF1.5tn worth of liquidity. But even with another HUF1.5tn being drained, excess liquidity will likely remain somewhere around HUF7tn. In terms of distribution, most excess liquidity sits at the one-day depo facility (paying 18%), whereas the other HUF2.1tn is in 2-month deposits (17.95%).
  • The combination of high rates and huge amounts of excess liquidity in the banking has placed the NBH’s P&L under pressure. One advantage of increasing RRR, from a P&L perspective, is that it pays the base rate, which is currently 13% and significantly lower than the marginal rate (18%). By increasing the share of lower-paid reserves the NBH can save, all else equal, some HUF56b or nearly 0.1% of GDP. JP Morgan consider the weight of sterilization costs on the P&L to be an increasing concern to the NBH, and an extra incentive to ease policy this year (and/or change conditions on RRR).
  • JP Morgan expect a 100bp cut to the 1-day depo in March, expecting inflation (both headline and core) to peak in February/March. Given that March is accompanied by a new forecast and new inflation report, JP Morgan are inclined to think that’s when the first move will occur.
  • They forecast that core CPI will fall to 12% by the end of this year, and hence in terms of magnitude, they cannot envision the cycle going much beyond 13%, which is the value of the base rate.