Europe

Analysts in London expect the Hungarian National Bank’s base interest rate to exceed 10% by the end of the year.

The Hungarian National Bank (MNB) base interest rate could peak above 10% this year, according to a significantly revised forecast by London-based financial analysts.

On Tuesday, the MNB’s financial council raised key ECB rates by 185 basis points to 7.75%, several times higher than analysts’ consensus. Both ends of the interest rate corridor rose 135 basis points, with overnight deposits at 7.25% and interest rates on eligible loans at 10.25%.

Morgan Stanley’s Global Financial Services Group’s Emerging Markets Research Team in London evaluated the situation on Tuesday night, with the Hungarian central bank phasing out interest rate tightening, as opposed to before. Emphasized that the reference to the pace is no longer used for rate determination.

According to World Bank analysts, this suggests that the growth dynamics of the Hungarian economy have changed the MNB’s response by moving down the list of priorities.

Related article

Central Bank: Capital, liquidity reserves make the banking system resilient to crisis

Central Bank: Capital, liquidity reserves make the banking system resilient to crisis

According to stress tests, the sector meets regulatory liquidity and capital requirements, even in severe stress scenarios. “Continue reading

Analysts at Morgan Stanley in London said they have revised their interest rate forecasts at the end of the third quarter of this year from the previous forecast of 8.90 to 10.00%, based on this and also in light of rising inflation expectations. %.

The House of Representatives does not rule out that the MNB will consider ending the tightening cycle in September if inflation stabilizes.

However, according to Morgan Stanley experts, the central bank of Hungary is likely to raise interest rates by 25 basis points in October and could raise interest rates to 10.25% in the fourth quarter of this year.

Related article

Central bank proposes major changes to Hungary’s pension system

Central bank proposes major changes to Hungary's pension system

For example, NBH associates retirement with life expectancy. This may mean that the age limit will be raised in some way as life expectancy is slowly but gradually increasing.Continue reading

According to World Bank analysts, this suggests that the growth dynamics of the Hungarian economy have changed the MNB’s response by moving down the list of priorities.

The new rate hike forecast, 135 basis points higher than the company’s original forecast, puts only a slight downward pressure on Hungary’s GDP growth dynamics as mortgage caps continue to weaken the effect of monetary policy transmission on households. is. According to Morgan Stanley.

However, London analysts at the House of Lords expect domestic demand to slow at a faster pace and lower inflation relatively rapidly in 2023.

Analysts at Morgan Stanley believe this will allow MNB to begin its mitigation cycle in mid-2023. The company’s forecast on Tuesday suggests that all of these factors could reduce the central bank’s base interest rate to 7.50 percent (275 basis points) by the end of next year.

Related article

Central bank governor demands a program to increase competitiveness

Central bank governor demands a program to increase competitiveness

Matolcsy said the new government needs to “find the secret to success” in a “strong challenge over a decade.”Continue reading

This is also a significantly revised forecast. House previously predicted the start of the MNB mitigation cycle in the fourth quarter of 2023 and expected a rate cut of only 90 basis points next year.

The Emerging Markets Research Team at Capital Economics, one of the world’s largest financial and economic research institutes based in London, continued to be under pressure from many factors, including the expansion of Hungary’s current account deficit, in its assessment Tuesday evening. I emphasized that. Tightening of the global interest rate environment and worsening investor risk sentiment.

The company expects MNB to continue to tighten monetary policy at an aggressive pace, raising base interest rates to 10.50% by the end of this year.

Capital Economics analysts recall earlier forecasts that MNB’s base interest rate was expected to peak at 8.20 percent in 2022.

Featured images by László Róka / MTVA



https://hungarytoday.hu/hungarian-national-bank-of-hungary-mnb-morgen-stanley-house-of-lords/ Analysts in London expect the Hungarian National Bank’s base interest rate to exceed 10% by the end of the year.

Back to top button