Hungarian Forint: MNB caution offers modest HUF support - Commerzbank

Commerzbank’s Tatha Ghose reports that Hungary’s central bank, Magyar Nemzeti Bank (MNB), cut its base rate to 5.50% but avoided pre-committing to further easing, stressing that September’s Inflation Report will guide policy. The bank will monitor global rate hikes, could limit the scope. FX markets reacted positively, and Ghose concludes that MNB communication was modestly supportive for the Forint.

Cautious easing and HUF reaction

"Hungary's National Bank (MNB) cut its base rate by 25bp to 5.50% yesterday as had been unanimously expected. MNB had already signalled that there was room for further easing during the summer, before the entire rate-cutting cycle would be reconsidered using the September Inflation Report – this message was repeated yesterday, but with a twist."

"Yesterday however, MNB did not pre-commit to further easing and instead repeated that the future rate path will be decided in September based on updated forecasts."

"Varga [MNB Governor Mihály Varga] also emphasised that MNB will monitor prospective rate hikes by major central banks, which suggests that the broader global backdrop would act as a limit on Hungarian rate cuts."

"The FX market appeared to be taking the new policy guidance positively, although the rally in the forint relative to the Polish zloty was modest so far."

"That aside, our main conclusion is that MNB’s communication and guidance proved to be modestly HUF-supportive yesterday."

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