Hungarian Forint: Cautious MNB stance supports HUF – Commerzbank
Commerzbank’s Antje Praefcke reviews the Hungarian Central Bank decision to keep the key rate at 5.50% while lowering its medium-term inflation target to 2.5% from 2028. The MNB slightly raised its 2027 inflation forecast and will move to eight policy meetings per year. She sees the cautious, data-driven stance as generally supportive for the Forint, barring renewed rate cuts.
Lower target, data-driven policy
"As expected, the Hungarian Central Bank (MNB) left its key interest rate unchanged at 5.50% yesterday. Nevertheless, there was plenty of news. The MNB decided to lower its inflation target from 3% to 2.5%. It stated the following:"
"Ultimately, the issue is convergence with the euro zone, and the current low inflation rates support this decision, although it should not be overlooked that inflation risks remain due to the drought and energy prices. However, the MNB addresses these risks in its statement:"
"The MNB slightly raised its inflation forecast for 2027. It will base future interest rate decisions on "the inflation outlook, global developments, and Hungary’s risk premium, based on which it will take decisions on the level of the base rate in a cautious and data-driven manner." However, the data-driven approach also means that the Monetary Policy Council could decide to hold rates steady or cut them, Central Bank Governor Mihaly Varga later emphasized to reporters."
"Another change will be that, starting in 2027, the central bank’s meetings will no longer be held monthly; instead, there will be eight meetings per year to decide on the policy rate."
"Interest rates remained unchanged, as expected; the MNB continues to maintain a cautious stance in light of price risks; and several technical changes were introduced that will take effect in 2027 and 2028, respectively. In general, the MNB’s monetary policy is a supportive factor for the forint, provided that it does not consider continuing the interest rate cycle for the foreseeable future. Following the decision, the HUF initially rose accordingly, but then gave up its gains as the euro weakened against the USD."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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