HUF: Disinflation supports dovish MNB without hurting forint – Commerzbank

Commerzbank’s Tatha Ghose says Hungarian inflation has fallen back within target on core measures, validating the MNB’s earlier rate cut and dovish pivot. He sees room for further gradual easing conditional on continued price moderation and stable external conditions, and does not expect the easing cycle to weigh on the forint, which remains driven by global factors.

Falling inflation allows gradual rate cuts

"More importantly, our preferred inflation measure, which is calculated from month-on-month change of core price level (seasonally-adjusted), has now moderated to within target for most core inflation measures."

"The data now suggest that this may have been a temporary divergence – disinflationary forces are finally becoming more entrenched and broad-based."

"Of course, the latest figures provide justification for further gradual easing, with the pace and scale of future cuts dependent on the continued moderation of price pressures and the stability of the external environment."

"We do not anticipate a negative impact of rate cuts on the forint even in the medium-term because the easing cycle is fundamentally backed by inflation improvement."

"In any case, more significant global developments have been driving HUF movements over the past week and a softer CPI print did not stand in the way of the currency’s rebound yesterday."

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