POLL-Hungary central bank expected to trim base rate further next week

Credit: REUTERS/Bernadett Szabo

By Krisztina Than

BUDAPEST, July 16 (Reuters) - The National Bank of Hungary is expected to cut its base rate by 15 basis points to 0.6% on Tuesday, according to a poll of analysts, extending its policy easing to shore up the economy hit by the coronavirus pandemic.

The central bank unexpectedly cut its base rate by 15 bps to 0.75% in June, its first such move in four years.

All 13 economists polled between July 13 and 16 said the NBH would cut its base rate HUINT=ECI again next week, with 12 analysts projecting another 15 bps cut and one analyst forecasting a 10 bps reduction.

The 12 analysts who also gave a forecast for the overnight deposit rate HUODPO=ECI said it would stay at -0.05%.

The median forecast sees the base rate at 0.6% at the end of this year and also at end-2021.

Analysts expect Hungary's economy to shrink by 4.35% this year, less than their previous forecast of 5.1%. The government projects a 3% dip while the NBH sees modest growth of 0.3% to 2%.

The NBH may cut its base rate by another 15 bps in July but that is as far as it will go, Deputy Governor Barnabas Virag said last month, adding that market pricing of further aggressive rate easing was exaggerated.

"We now expect the NBH to cut its base rate by another 15 bps to 0.60% at its upcoming meeting on July 21, on the back of Virág's recent forward guidance, but also see room for more cuts in 4Q20 and 1Q21," Morgan Stanley said in a note.

Peter Virovacz, an economist at ING, said he expected no more cuts after July and "the first hike in the base rate could come only in 2023, as Hungary will reach the pre-crisis GDP level late 2022".

As of Thursday, Hungary, which has a population of around 10 million, has recorded 4,279 cases of COVID-19 and 595 related deaths.

(Reporting by Krisztina Than; Editing by Nick Macfie)


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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