What can the forint expect?
For now, there is no need to rewrite the Hungarian interest rate path, the base rate is expected to drop to 6.25 percent by the end of the year, and the central bank may still have room for maneuver. Next year, the forint may be one step weaker.
Although before the latest interest rate decision of the Hungarian National Bank, it was not yet certain that the 25 basis point reduction would take place, the Hungarian central bankers finally decided on this. “However, the previously expected interest path does not need to be rewritten. Now we see that the MNB brought forward the reduction expected for August to July,” said Dávid Németh, senior analyst at K&H, in the financial institution’s podcast. According to the specialist, the current base interest rate of 6.75 percent may be reduced to 6.25 percent by the end of the year.
Where can the HUF go?
“Despite the reduction, the central bank tried to remain cautious and show a strict tone. He indicated that we should not sit back, we have not yet won the battle against inflation”
– added the specialist. Explaining K&H’s forecast, he said that inflation could rise to between 4.5-5 percent, but the real interest rate could still be in a positive range, so the central bank still has room for maneuver.
Regarding the evolution of the forint exchange rate, Dávid Németh said: “From the point of view of the euro, we consider the range between HUF 385 and 400 to be the main band. Rather, we expect the euro to rise in price in the medium term, next year we are thinking much more in the 390-405 band as the main trading band, but this year I still think there is no need for a significant shift in the band.”
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