New data and central bankers' comments support PLN

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NBH predictably keeps rates unchanged

New data and central bankers´ comments support PLN

As expected, the Hungarian central bank kept its key interest rate unchanged at the all-time low of 2.1% yesterday. Nor the accompanying statement brought a surprise. In the statement, the NBH reiterated its view that the current base rate was consistent with the medium-term goal of price stability and provided adequate support to the real economy. This view is in line with our outlook of stable rates till the end of this year at least. Next year, however, the situation may change. First, the debt-to-GDP ratio will not have to be controlled as strictly as it was the case this year. Secondly, ahead of conversion of FX denominated mortgages at pre-set conversion rates, a weaker forint might be desirable. So far, the Hungarian forint has been little affected by yesterday´s NBH meeting and has hovered within a narrow range close to its previous level.

In contrast, the Polish zloty firmed by 0.4 % yesterday, after central banker Jerzy Hausner cooled expectation of further rate cuts. Mr. Hausner, who is considered a swing voter in the MPC, said yesterday that Polish interest rates were at the adequate level and may be lowered further (only) if economic growth weakened. Also Elzbieta Choja-Duch, one of the most dovish members of the NBP leadership, has recently spoken against additional rate cuts. The two statements, though, contrast with Marek Belka’s comments of Monday, when the Governor expressed his worries about business hampering effect of a stronger zloty. In any case, yesterday’s better than expected data (retail sales rising by 2.3 % and unemployment falling to its 5-year low of 11.3 %) support stable interest rates.