Hungarian central bank likely to keep policy unchanged

The Hungarian central bank, MNB, is set to hold its first interest rate today. According to a Commerzbank research report, the central bank is likely to keep its policy unchanged today. Still, as exchange rate is relative, an unchanged policy stance might signify that some other central bank is becoming tighter against a given central bank and this might impact the exchange rate cross between the two, stated Commerzbank.

In the recent times EUR/HUF has been increasing modestly and the Hungarian forint has been underperforming peers such as the Polish zloty. This is probably due to inflation environment turning more hawkish. In such an environment, the Polish MPC, which includes a greater proportion of hawks, might see a material shift in stance, noted Commerzbank.

National Bank of Poland governor Adam Glapinski has spoken about the prospect of eventual hikes in interest rate in Poland, while MPC member Lukasz Hardt also warned against the requirement to observe inflation developments and be ready for hikes.

Meanwhile, the Hungarian MPC is mainly composed of doves. The committee members are unlikely to respond to early signs of inflation, particularly as long as quarterly GDP readings continue to be weak.

“Today's meeting will likely highlight the dovishness of the Hungarian central bank further. We see EUR/HUF rising towards 315.00 in coming months”, added Commerzbank.