Hungary’s Monetary Policy Council is expected to re-start its previous policy of cutting interest rates, according to Commerzbank, which has just released a research note to its clients. As cited by the Budapest Business Journal, Commerzbank economists said they expected Hungary’s GDP growth to slow to just 2.2 percent this year, a trend they did not expect to end quickly. “We forecast core inflation to moderate further… We expect the MNB to lower inflation projections noticeably in March.” They went on to predict that the ECB would revise downwards their inflation forecasts in March and that this would clear the way for further monetary expansion. As a result, wrote Commerzbank, “we expect the MNB to cut its benchmark rate from 1.35 percent to 1 percent.” While the monetary council has made its preference to leave the rates where they are, they wrote that “we question why the MNB would not cut rates to maintain the current level of real interest rate after it too has lowered inflation projections.”
