KBC Market Research Desk
KBC Bank
Headlines
Hungary’s deflation deepens in September. Is another NBH’s rate cut on horizon?
Consumer prices surprisingly fell 0.6% month-on-month in September, which means that deflation deepened in Hungary. As a result, consumer prices were lower 0.4% y/y on average. The key item which caused a drop in headline inflation was the motor fuel price falling more than 5% last month. However, it is worth noting that consumer durables and prices of services fell by 0.1% m/m and 0.6% m/m respectively. These are the items of core inflation, so they could provide more serious inflation signals for the National bank of Hungary and its policy. Still core inflation rose to 1.3% y/y from 1.2% y/y in August. Anyway, a closer scrutiny of MNB comments becomes important again as they could give signals whether the NBH is ready to act again and ease its policy further.
Actually we do not rule out a possibility that a rate-cutting cycle will be resumed in Hungary. We believe that should the NBH cut again, the base rate might be lowered to just above 1% (two 15 bps cuts may be expected). But much will depend on the forint which has remained stable after today’s inflation release. Nevertheless, if the EUR/HUF pair move closer to the 300 level, a rate cut will be seriously on the table given the deeper deflation.
| Currencies | % chng | |
| EUR/CZK | 27.12 | 0.1 |
| EUR/HUF | 312.1 | 0.6 |
| EUR/PLN | 4.23 | -0.1 |
| EUR/USD | 1.12 | -0.3 |
| EUR/CHF | 1.09 | 0.4 |
| FRA 3x6 | % | bps chng |
| CZK | 0.25 | -1 |
| HUF | 1.32 | 1 |
| PLN | 1.72 | 3 |
| EUR | -0.04 | 1 |
| GB | % | bps chng |
| Czech Rep. 10Y | 0.65 | -1 |
| Hungary 10Y | 3.31 | 1 |
| Poland 10Y | 2.67 | 3 |
| Slovakia 10Y | 0.85 | -5 |
| CDS 5Y | % | bps chng |
| Czech Rep. | 50 | 0 |
| Hungary | 167 | 5 |
| Poland | 78 | 0 |
| Slovakia | 49 | -1 |
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
Recommended Content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.