Yesterday, the Hungarian forint rallied after the central bank hinted end of the cycle of rate easing. The MPC lowered the lending rate and the base rate each by 15bps, on par with expectations. MNB had already mentioned earlier that the end to easing cycle was approaching. Therefore, the hint received yesterday was not a surprise. However, certain observers, including Commerzbank, have been projecting another cut of 15bps in 2016.
However, after the central bank’s statement yesterday, the probability for another reduction has greatly fallen. But the central bank’s statement appeared less sanguine with regard to a complete stop than the previous time. If the core inflation does not trend lower in the coming months, and manufacturing growth continues to be stable, then the possibility of central bank lowering one more time in 2016 will be removed from the forecast, said Commerzbank in a research report. However, there might be a slight risk on the downside to the EUR/HUF forecast of 320 by the end of 2016, added Commerzbank.
The material has been provided by InstaForex Company – www.instaforex.com