NBH seen ‘on hold’ today – TDS

Macro Strategist at TD Securities Annette Beacher expects the Hungarian central bank (MNB) to refrain from acting at today’s meeting.

Key Quotes

“In line with the unanimous consensus, we expect the NBH to keep its policy rate on hold at 0.9% today”.

“At the January MPC meeting the MPC reaffirmed that the policy rate is likely to be on hold for an extended period. We also expect the O/N Depo and Lending rates to be held at -0.05% and 0.9% respectively”.

“However, the NBH has recently been easing monetary policy by progressively limiting the amount that domestic banks can deposit at the CB for 3-months at the policy rate”.

“This cap is reviewed quarterly, and in December the cap was set to be at HUF750bn by the end of Q1 2017. The effect of imposing a cap has been to cause 3-month BUBOR to drop from around the level of the policy rate in September of last year to 0.23% now”.

“In January Deputy Governor Nagy said that the NBH remained firmly in an easing cycle. So at today’s meeting the cap may be reduced further, but we think that we are nearing the end of the easing cycle, so any further reduction in the cap is likely to be modest”.