KBC Market Research Desk
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The forint eases on S&P decision to leave rating intact
MNB unlikely to change rates
The Hungarian forint bounced back from 8-week highs on Monday due to unfulfilled expectations that Standard & Poor’s would upgrade Hungary’s rating. After the long-term foreign currency rating had stayed at BB with stable outlook, the forint weakened by 0.4 % yesterday and closed at 312.3 EUR/HUF. Forint’s regional peers – the Czech koruna and the Polish zloty were little changed on Monday.
Today, Hungarian central bank will hold its rate setting meeting. In July, having cut its base rate to 2.10 %, the NBH said that the bottom of the rate-setting cycle was reached and it would hold its rates stable for a long period of time. At the last meeting, the decision to keep rates unchanged was unanimous. After the ECB had unexpectedly cut the base rate by 10 bps though, the NBH signalled increased flexibility, presumably suggesting that it could yet find some room for further monetary loosening. Nevertheless, despite the statement, we don’t expect any rate movement today, mainly owing to headline CPI, which started to accelerate two months ago. Although its level is still low (+0.2 % Y/Y), this is mainly because of previous public utility cost reduction, a rich harvest and a low oil price. The core inflation has stayed close to 2.5% Y/Y in the last 4 months and projections indicate that CPI may rise to around 3 % by the end of the next year. As the inflation target of the NBH is 3 % Y/Y +/- 1 percentage point, the projected CPI perfectly fits the target and no monetary policy adjustment is needed.
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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