National Bank of Hungary likely to ease further

There is a rise in Hungary's October inflation, which leaves the National Bank of Hungary (NBH) plenty of room to maintain its loose monetary policy conditions for an longer period. 

"The NBH predicts that inflation will only reach 3% by end-2017. We consider this forecast optimistic and expect inflation to remain in the lower part of the target range even at end-2017", says Barclays. 

The historically low NBH's base rate of 1.35% was mainly due to low inflation of the country. NBH announced that they would ease monetary conditions through QE.

This scheme's parameters are still being designed, further measures are planned by NBH to keep banks out by which they would be encouraged to increase government holdings.

Also, there will be extension of the subsudized lending program to small and medium sized enterprises, which includes HUF600bn under the Funding Growth Scheme.

"At this point the NBH has not considered lowering its base rate further. However, if a softening of growth continues to develop, this could change and the NBH would probably consider such cut in Q1 16", notes Barclays.