17 Feb 2015
NBP and NBH might ease again – KBC
FXStreet (Barcelona) - According to KBC Bank, National Bank of Hungary and National Bank of Poland might cut rates, as swift GDP figures from both the countries will likely tighten monetary conditions as a result of the expected rise in strength in forint and zloty.
Key Quotes
“Let us begin with inflation, which surprised with its low values in both Hungary and Poland, pushing year-on-year figures even more into negative territory. As a result, markets started to even more aggressively bet on rate cuts by both the National Bank of Hungary and the National Bank of Poland.”
“Paradoxically, such a reaction by the central banks is actually more likely after the release of very good GDP figures. The reason is that swift growth will put pressure on the forint and the zloty to continue to strengthen, and this will tighten monetary conditions in Hungary and Poland; naturally, this is an undesirable scenario amid deflation."
“Thus, in contrast to last year’s comments of Polish central bankers, we think that deepening deflation along with the risk of its protraction beyond previously expected limits will overshadow otherwise good news from the economy and persuade the NBP to cut interest rates in March (we see a 50 bps cut as the most likely option)."
“A deep rate cut in Poland might be actually a trigger for NBH easing too. While the plan of extending the NBH’s funding for lending program on big corporates rather works against a rate cut, the strong forint together with deflation and rate cuts elsewhere go the other way.”
“Hence, the earliest rate cut in Hungary may come on 24th March as the NBH will publish the next inflationary report at that time.”
Key Quotes
“Let us begin with inflation, which surprised with its low values in both Hungary and Poland, pushing year-on-year figures even more into negative territory. As a result, markets started to even more aggressively bet on rate cuts by both the National Bank of Hungary and the National Bank of Poland.”
“Paradoxically, such a reaction by the central banks is actually more likely after the release of very good GDP figures. The reason is that swift growth will put pressure on the forint and the zloty to continue to strengthen, and this will tighten monetary conditions in Hungary and Poland; naturally, this is an undesirable scenario amid deflation."
“Thus, in contrast to last year’s comments of Polish central bankers, we think that deepening deflation along with the risk of its protraction beyond previously expected limits will overshadow otherwise good news from the economy and persuade the NBP to cut interest rates in March (we see a 50 bps cut as the most likely option)."
“A deep rate cut in Poland might be actually a trigger for NBH easing too. While the plan of extending the NBH’s funding for lending program on big corporates rather works against a rate cut, the strong forint together with deflation and rate cuts elsewhere go the other way.”
“Hence, the earliest rate cut in Hungary may come on 24th March as the NBH will publish the next inflationary report at that time.”