EUR/HUF: The risk premium on the Forint will stay elevated – Commerzbank

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The Forint enjoyed one good spurt last week. Economists at Commerzbank analyze HUF outlook ahead of Hungary’s National Bank (MNB) meeting.

MNB to continue rate cuts 

MNB is widely expected to keep following its pre-signalled rate path and cut the rate corridor once again by 75 bps today.

Hungarian core inflation YoY rate of 9.1% is still near the double-digit mark. Nevertheless, this is of less concern now as the MoM core inflation rate has returned roughly to historical range. If MNB were to maintain a higher than 9% interest rate through Q1 2024 for example, that will translate to a decently positive real interest rate, which should support the Forint.

The risk premium on the Forint will stay elevated, but MNB will carry on with monetary policy normalisation regardless.