MNI NBH Preview - November 23: Another "Cautious" Step
The NBH are likely to deliver another 75bp cut to the base rate, taking it to 11.5%.
- The NBH are widely expected to deliver another 75bp cut to the base rate following guidance from central bank officials that the pace of easing be maintained from the October decision.
- While benign inflation developments could instead facilitate a larger cut, the NBH are seen maintaining its “cautious” stance and opting for a smaller move, taking the base rate to 11.50%.
- Of the sell-side views we have previewed in this document, all are expecting a 75bp cut, though the December decision is not as well-telegraphed.
See the full preview with a summary of sell-side analyst views here:
Since the previous rate decision, headline inflation has continued to decline, falling by over 2ppt from +12.2% y/y in October to +9.9% in November, back into single digits for the first time since April 2022 and achieving the government’s year-end target ahead of schedule. The main driver was a significant fall in food and non-alcoholic beverage inflation, from +13.4% y/y to +8.0%y/y, due both to base effects and weaker momentum, however, there were broad-based falls in most categories of the CPI basket. Core inflation fell to +10.9% y/y from +13.1% the month prior.
Following the data, Deputy Governor Virag reiterated previous commentary that easing will be made in a “cautious” manner, though he offered specific guidance that the 75bp rate cut pace will likely be maintained at the November MPC meeting. Such a decision had already largely been anticipated by markets, with implied vols capturing the turn of the year and early '24 trading at a discount to realised as NBH comms point to a more predictable approach for NBH policy – 3m implied EURHUF vols briefly traded to their lowest since Feb ’22 last week.