NBP’s Hausner: Rate hike more probable than a cut
EC set to unveil details of infringement action against Hungary
The Polish zloty outperformed its peers on Monday and slightly strengthened whereas the forint and the koruna posted some losses. Jerzy Hausner, the NBP’s Monetary Policy Council member, said in the morning that the central bank should leave interest rates unchanged for some time. Moreover, he disappointed investors who bet on an interest rate increase as he said that the probability of a rate hike was much higher than that of a rate cut. We share Hausner’s view and believe that the interest rates may stay unchanged in 2012. According to FRA rates, market currently bets on a rate cut in 9 months horizon.
As far as the situation in Hungary is concerned, the European Commission is set to announce details of measures aimed against the country’s new laws by noon today. According to Reuters (who cited an EU source), the commission is ready to take action in three areas. The most controversial one is the central bank law which is the key to even start negotiations with the IMF on a new stand-by loan. Regarding the market impact, we believe the situation is anything but calm and we think that recent gains of Hungarian assets (both bonds and the forint) driven by the promises of the Orban’s administrative have been rather premature. Therefore, we believe that further losses of the forint are likely in sessions ahead.