Commerzbank’s Michael Pfister anticipates that the Hungarian central bank will restart its interest rate cut cycle, with market consensus pointing to a 25 basis point reduction at today's meeting. This expectation is based on the Hungarian Forint's strength and inflation coming in lower than anticipated, which leaves real interest rates at elevated levels and provides room for monetary easing [1]. According to Bloomberg consensus, a 25-basis-point cut is almost certain, with only one analyst forecasting a larger, 50-basis-point move [1].
Hungary currently has the lowest inflationary pressure among the CE3 countries, as measured by core HICP, despite maintaining the highest key interest rate in the region [1]. This combination results in high real interest rates, supporting the case for further rate cuts [1].
Markets are pricing in approximately three rate cuts over the next six months, including today's expected move. However, no additional cuts are anticipated beyond this period unless inflation remains subdued, which could open the door for further easing [1]. Today's decision is not expected to cause significant movement in the Hungarian Forint, provided that further easing is not discussed at the meeting [1].
CONCLUSION
The Hungarian central bank is poised to resume its rate-cutting cycle, supported by strong currency performance and low inflation. Markets expect a moderate pace of easing, with limited immediate impact on the Forint. The outlook for further cuts depends on sustained low inflation, but no additional moves are expected in the near term.