HUF: Rate hold to continue – Commerzbank

Hungary’s National Bank (MNB) will almost certainly leave its base rate unchanged at 6.50% today, leaving the overnight rate corridor unchanged as well. This decision aligns with the widely anticipated policy guidance for a prolonged hold. Forward markets do not anticipate any rate cuts within the next 3-6 months (a mild 10bp rate cut is priced-in by six months’ time – this is simply theoretical: MNB will not really cut by 10bp when it eventually does, it will cut by 25bp – hence, this pricing represents low confidence in a rate cut even in six months’ time), Commerzbank's FX analyst Tatha Ghose notes.

Forint has outperformed the Polish Zloty handily this year

"The upcoming statement will likely reiterate the necessity for tight monetary conditions to continue in order to safeguard financial stability and ensure positive real interest rates. At the press conference, governor Mihály Varga is expected to emphasise that financial stability and inflation expectations remain the key anchors of policy."

"Varga has previously noted that household and corporate inflation expectations remain elevated at around 8%, which is inconsistent with the inflation target. He has also cautioned that services and food prices continue to rise, indicating that the fight against inflation is not yet over. The MPC has highlighted that corporate pricing behaviour outside of regulated areas appears to be excessive too."

"Despite government pressure for rate cuts, the MPC is expected to maintain its current policy stance of keeping tight monetary conditions at least until December – more likely until the end of Q1 2026. Varga's sober monetary stance will likely continue to support the forint exchange rate as questions about politicisation of monetary policy have more or less been put to rest. The forint has outperformed its main rival – the Polish zloty – handily this year, and we expect this trend to continue as political problems swamp the Polish landscape."