Hungarian Forint: Rate-cut cycle seen restarting – Commerzbank

Commerzbank’s Michael Pfister expects the Hungarian central bank to resume interest rate cuts, with consensus looking for a 25 basis point move. A strong Hungarian Forint and lower-than-expected inflation provide room for easing, leaving real rates high. Markets price roughly three cuts over six months, and today’s decision is not expected to move HUF significantly if further easing stays off the agenda.

Forint strength and low inflation allow easing

"The Hungarian central bank is expected to resume its interest rate cuts today, after such a move was already discussed at last month’s meeting. According to the Bloomberg consensus, a 25-basis-point cut is almost certain, with only one analyst expecting a cut twice that size."

"Hungary has currently even the lowest inflationary pressure among the CE3 countries according to the core HICP. It should be noted that this is despite Hungary having the highest key interest rate."

"The resulting high real interest rate therefore offers sufficient scope for interest rate cuts."

"While the market is now pricing in rate cuts once again (in March, we were sceptical about rate hikes being priced in), it is only anticipating roughly three cuts over the next six months"

"(including today's), with no further cuts expected after that. If price pressures remain this subdued, there may be scope for further cuts. But this is not on the agenda for today's meeting, so the decision is unlikely to trigger any significant movement in the HUF."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)