Stanislava Pravdova
Danske Bank A/S
Over the past two weeks, the central banks in EMEA regions held their final monetary policy setting meetings for this year. We take a look at the outcomes and the outlook for monetary policy next year.
NBP still stubbornly hawkish
While the Polish central bank stayed on hold as widely expected at December’s Monetary Policy Council (RPP) meeting, it remained stubbornly hawkish, in our view. The NBP completely downplayed the risk of a pronounced period of undershooting of its inflation target or even the risk of outright deflation in the Polish economy. Based on our expectation that the NBP needs to acknowledge the risks of deflation and that the economic recovery will be slow, we still expect the central bank to turn dovish next year. This should weigh on the Polish zloty going into 2014. We forecast the EUR/PLN at 4.25, 4.30 and 4.30 on three-, six- and 12-month horizons.
MNB to continue baby-step rate cuts but more easing on cards
The Hungarian central bank (MNB) delivered yet another baby-step rate cut of 20bp this week, bringing the key policy rate to 3.0%. In a short statement, the MNB said that inflation points to further monetary easing but the central bank may need to slow interest rate cuts. In our view, still quite aggressive monetary easing is forthcoming given the high risk of deflation in Hungary. We therefore expect the MNB to bring the key policy rate down to 2.20 by end-2014. We should therefore see some softness in the forint in the near term. We forecast EUR/HUF 305, 305, 300 on three-, six- and 12-month horizons.
More from CNB to come next year
The Czech central bank kept interest rates unchanged as expected and furthermore it kept its policy of FX interventions unchanged at this week’s board meeting. The CNB reiterated that the floor for EUR/CZK remains at 27 and that it would let the CZK float if it went weaker but would intervene if it gained. It said the central bank will keep the EUR/CZK 27 floor at least until start of 2015. In our view, the recovery and inflation will be much softer than the CNB assumes and we therefore expect the CNB to lift the floor next year. Our forecast for EUR/CZK is for 27.70, 28.00 and 28.50 on three-, six- and 12- month horizons.
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