MNI NBH Review - November 2023: Pace of Easing to Be Maintained

Executive summary:

• The NBH delivered a 75bp cut to the base rate following an identical move last month.
• Both the decision itself and the policy statement offered very few surprises as the Deputy Governor had offered explicit forward guidance prior to the meeting that the pace of easing will be maintained from October.
• Perhaps most interestingly, Virag said in his post-decision press conference that the base rate could drop below 10% by February, hinting at more regular cuts at its upcoming meetings.

See the full review, with a summary of sell-side analyst views, here:

MNINBHRevNov23.pdf

The November policy statement was little changed to the October edition, with the NBH striking familiar notes of caution and warning against “heightened geopolitical tensions [that] are posing increased risks to the outlook for the global economy in general.” Optimism continues to be seen in the domestic data, with inflation still seen reaching around +7% by the end of the year, while the “rapid and substantial improvement in the external balance” was once again cited.

While Virag largely repeated this rhetoric in his post-decision press conference, he also noted that the base rate could fall to below 10% by the February meeting. With the base rate currently standing at 11.50%, this would imply two more 75bp moves at forthcoming meetings. Indeed, among sell-side consensus is growing for another 75bp rate cut in December, which would take the year-end policy rate to 10.75%. Though NBH policy is becoming increasingly predictable, Virag once again mentioned that there were several options on the table at this meeting ranging from 50bps to 100bps of cuts. With the NBH’s data-dependent stance, this provides the central bank room to adjust the pace of monetary policy easing according to any potential developments in domestic inflation, HUF volatility and global risk sentiment.