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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.
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Free AccessMNI NBH Preview - October 2023: Cautious Stance Warranted
Executive summary:
- Having completed the process of rate convergence with a 100bp cut to the one-day deposit rate last month, the NBH are likely to moderate the pace of its easing cycle at this meeting given heightened market uncertainty surrounding Israel-Palestine matters.
- While benign inflation developments may facilitate the continued fast pace of easing, the volatile geopolitical situation and HUF sensitivity to global factors will likely incline the NBH to act with a greater degree of caution instead.
- Among sell-side, expectations are unanimous that the scale of rate cut be reduced at this meeting. Of the views we have previewed in this document, most are expecting a 75bp cut to the base rate.
See our full preview of the decision, including a summary of sell-side analyst views, here:
Since the September decision, inflation data has continued to show favourable developments. Headline inflation fell by over 4ppt from +16.4% y/y in August to +12.2% in September, while core inflation fell to +13.1% y/y from +15.2% the month prior. Central bank Governor Gyorgy Matolcsy as well as various government officials have said they expect inflation to drop to single-digits by December at the latest, indicating that real rates will be contractionary through year-end.
Despite these benign developments, central bank officials will be concerned by the heightened uncertainty amid the ongoing Israel-Palestine crisis. While HUF has so far remained resilient to the risk-off tone in global markets, the rise in long-end yields in core markets poses downside risks to the local currency. As a result, another 100bp cut is unlikely at this juncture given that the NBH have repeatedly stressed that “a cautious approach to monetary policy is warranted” – with the NBH having previously noted that “volatility in international investor sentiment” and risks to financial stability specifically warrant a cautious stance.
To read the full story
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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.