KBC Market Research Desk
KBC Bank
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The NBH cuts its base rate by 15 bps as expected, more to come, though the market is less certain about it
Yesterday, the Monetary Council of the NBH cut the benchmark rate by 15 basis points to 1.05%, kept the O/N deposit rate at 0.05% and decreased overnight collateralised lending rate from 1.45 to 1.30. As a result of that interest rate corridor narrowed further asymmetrically. According to Council’s opinion the sustainable achievement of the inflation target points to a further slight reduction in the policy rate. Hence, as we expected the NBH will continue in its easing cycle, which began last month. In our view the NBH easing cycle may continue at least till June, when the next inflationary report will be published. So, today’s 15bp cut might be followed with two more steps in May and June down to 0.75% from the current level of 1.2%.
Ahead of the rate cut EUR/HUF jumped near to the 312.80 level but after the NBH decision it sank below the 312 level. Interestingly, following the release of the NBH statement, the Hungarian money markets corrected slightly its expectations about NBH’s future rate cuts as FRA rates and generally the short of the curve moved higher.
| Currencies | % chng | |
| EUR/CZK | 27.00 | 0.0 |
| EUR/HUF | 311.1 | -0.1 |
| EUR/PLN | 4.37 | -0.8 |
| EUR/USD | 1.13 | 0.3 |
| EUR/CHF | 1.10 | 0.1 |
| FRA 3x6 | % | bps chng |
| CZK | 0.28 | 0 |
| HUF | 0.83 | 3 |
| PLN | 1.63 | 0 |
| EUR | -0.25 | 1 |
| GB | % | bps chng |
| Czech Rep. 10Y | 0.53 | 3 |
| Hungary 10Y | 3.11 | 3 |
| Poland 10Y | 3.11 | 6 |
| Slovakia 10Y | 0.84 | 1 |
| CDS 5Y | % | bps chng |
| Czech Rep. | 42 | 0 |
| Hungary | 146 | 0 |
| Poland | 87 | 0 |
| Slovakia | 41 | 0 |
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.
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