Further Rate Cuts Ahead

In line with expectations, the National Bank of Hungary (NBH) continued its monetary easing on September 28, cutting its benchmark base rate by 50bps to 7.50%. We hold to our view that further interest rate reductions are likely in 2009, with another 50bps cut expected at the subsequent monetary policy committee (MPC) meeting due at the end of October. Beyond then, our core scenario calls for one more 25bps reduction before the NBH halts the easing cycle in December.

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