Why 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.
Executive summary:
- In April, the NBH left the base rate and effective rate unchanged at 13% and 18% respectively. However, as per guidance from NBH Deputy Governor Virag, the upper rate of the Bank’s interest rate corridor was cut from 25% to 20.5% - in what was the first stage of monetary easing.
- Now, sell-side analysts are unanimous in seeing further easing of the Bank’s monetary policy tools with a cut to the effective rate of 18% as Hungary's risk backdrop continues to improve.
- Estimates of the cut to the effective rate range from 75bps to 300bps.
In recent monetary policy statements, the NBH have reiterated that an improvement in the risk environment is needed before the effective rate of 18% can begin to be normalised to the 13% base rate, and this is evident in both domestic and global developments – the latter of which has seen improvements as concerns regarding a US banking crisis ease.
Firstly, inflation in Hungary, while still among the highest in the EU at 24.0%, has begun to ease from its January peak with core inflation and food prices notably beginning to abide. Furthermore, trade balance data recorded its second consecutive surplus, recovering from a deep deficit in late-2022. This is significant as recent policy statements have explicitly stated that a “trend-like improvement in the current account” is needed as evidence of an improvement in Hungary’s fundamental risk profile. Last week’s GDP data, on the other hand, confirmed that the economy contracted for three consecutive quarters, though this potentially raises the odds of a rate cut as a deeper recession looks to be avoided.
Why 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.