Hungary: NBH to keep its policy rate on hold at 0.9% - TDS

Analysts at TDS and the unanimous consensus expect the NBH to keep its policy rate on hold at 0.9% and in addition, TDS expects the O/N deposit and lending rates to be kept at -0.05% and 0.90% respectively.

Key Quotes

“NBH will probably also not ease further using any “unconventional” measures. Lowering the cap on 3-month deposits at the CB has been the NBH’s preferred way of “unconventional” easing since September of last year, but the cap is reviewed only on a quarterly basis, the next review being due in September.  CPI inflation was running at 2.1% Y/Y in July, and in the NBH’s latest projections it is not expected to reach the 3% target in a “sustainable manner” until early 2019.  The press statement after the July meeting said that “in the Council’s assessment, the external environment continues to pose a downside risk to inflation”. We expect this dovish bias to be maintained.”