Hungarian Forint: No case for cuts as inflation risks rebuild – Commerzbank
Commerzbank’s Tatha Ghose expects the MNB to keep its base rate at 5.50% and argues that Hungary’s recovering real economy and re‑accelerating seasonally adjusted inflation momentum do not justify easing.
Hungarian Forint remains unaffected by potential cuts as inflation risks resurface, according to Commerzbank's Tatha Ghose. He anticipates the Hungarian National Bank (MNB) to maintain its base rate at 5.50% and contends that the recovering real economy and rising inflation momentum do not necessitate easing. Ghose highlights the country's large fiscal deficit, a lower future inflation target, and aspirations under ERM II, suggesting room for tighter policy.
The central bank is anticipated to keep the base rate unchanged, and the focus will be on whether they will signal rate cuts for November or December. Ghose's preferred seasonally-adjusted metrics indicate a shift from disinflationary territory to beyond target, indicating that monetary policy should respond to this momentum rather than relying on favorable base effects.
The fiscal policy further supports this conclusion, with the IMF warning about a projected 7.5% of GDP fiscal deficit for the year, making it difficult to converge with the Maastricht ceiling in the medium-term under unchanged policies. Until the consideration of rate cuts changes, Ghose believes the HUF will not be prepared for its next significant increase.
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