MNI NBH Review - October 2024: An Unsurprising Hawkish Shift
Executive summary:
- The National Bank of Hungary kept its base rate unchanged at 6.50%, in-line with unanimous consensus.
- Communication in the policy statement and press conference shifted in the hawkish direction, with the most notable piece of new messaging indicating that the Board is highly attentive to adverse HUF developments.
- Among sell-side, most are still expecting the central bank to deliver one additional 25bp cut in 2024.
See the full review, with a summary of sell-side analyst views, here:
Deputy Governor Kandracs delivered hawkish guidance in the post-decision press conference, stating that "if warranted by the external environment and the inflation outlook, the base rate may remain at the current level for an extended period." While that largely mirrored comments from Deputy Governor Virag last week, Kandracs also offered fresh guidance by stating that the board was "paying close attention" to the level of the forint. Given the new guidance, developments in the EUR/HUF exchange rate will be closely scrutinised both ahead of the US elections and in the immediate aftermath of the result.
Pre-decision speculation was that the central bank would deliver one more 25bp cut in 2024 (most likely in December alongside the release of an updated inflation forecast), so while the guidance this month does not necessarily alter that outlook, it has prompted some sell-side desks to make their calls for further easing this year with less conviction than they had previously, particularly given the uncertainty posed by upcoming decisions at major central banks as well as election next month.