Hungary: to cut or not to cut?
Just looking at the inflation numbers -- or rather the deflation numbers -- it should be clear that the Hungarian central bank will deliver yet another rate cut at next week's monetary policy meeting. Hence, in April, there was a drop in consumer prices of 0.1% y/y, so we have outright deflation in Hungary and our expectation is that for some time to come, this will be the case. Two other factors also support an expectation of a rate cut next week: 1) the forint remains fairly stable: 2) the ECB is likely to ease monetary policy further in the near future, which is likely to increase the relative carry on the forint compared with the eurozone.
Therefore, we believe the MNB will deliver a 10bp rate cut to 2.40%. However, consensus expects it to keep rates unchanged next week.
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