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26 Jan 2015
ECB’s QE might lead to NBH re-starting its easing – KBC
FXStreet (Barcelona) - The KBC Bank Research Team expects that the ECB QE’s influence on the Hungarian markets might lead NBH to restart its easing cycle, anticipating the bank to cut rates in February.
Key Quotes
“The aftermath of the ECB’s aggressive move may influence central banks in the region. This primarily applies to the National Bank of Poland and the National Bank of Hungary.”
“The Hungarian and the Polish economies remain in deflation, and thus the ECB’s surprisingly large expansive move may stand both the NBP and the NBH in good stead, as these central banks no longer need to be overly afraid that their own rate cuts would put the exchange rates of their respective local currencies at risk.”
“Bear in mind that both the forint and, in particular, the zloty weakened significantly a week ago in reaction to the rapid appreciation of the Swiss franc, and this optically reduced the margin of discretion for further monetary easing. This has understandably changed now in the wake of the ECB move and we do not think that Left opposition party Syriza victory in the Greek elections would change this conclusion too much.”
“Still, in our view the NBH would like to see the inflation figure for the January and how the ECB's decision influenced the Hungarian market. Thus, we think that a rate cut may rather come in February, if the market environment remains supportive. In that case the NBH may re-start an easing cycle with a 20bps rate (rather than just 10 bps).”
Key Quotes
“The aftermath of the ECB’s aggressive move may influence central banks in the region. This primarily applies to the National Bank of Poland and the National Bank of Hungary.”
“The Hungarian and the Polish economies remain in deflation, and thus the ECB’s surprisingly large expansive move may stand both the NBP and the NBH in good stead, as these central banks no longer need to be overly afraid that their own rate cuts would put the exchange rates of their respective local currencies at risk.”
“Bear in mind that both the forint and, in particular, the zloty weakened significantly a week ago in reaction to the rapid appreciation of the Swiss franc, and this optically reduced the margin of discretion for further monetary easing. This has understandably changed now in the wake of the ECB move and we do not think that Left opposition party Syriza victory in the Greek elections would change this conclusion too much.”
“Still, in our view the NBH would like to see the inflation figure for the January and how the ECB's decision influenced the Hungarian market. Thus, we think that a rate cut may rather come in February, if the market environment remains supportive. In that case the NBH may re-start an easing cycle with a 20bps rate (rather than just 10 bps).”