NBH remains on hold; EUR/HUF likely to rise during H1 2017, says Commerzbank

The National Bank of Hungary (NBH) maintained its interest rate unchanged at the monetary policy meeting held Tuesday, while implementing subsidiary channels of easing. However, the outcome failed to create any considerable impact on the domestic currency.

The NBH eased policy notionally by lowering the overnight lending rate by 10 basis points and the rate on one-week collateralized loans by 15bps, both of which now stand at 0.9 percent, the same as the base rate.

This step is unlikely to have a material impact, but goes to confirm that the central bank is in easing mode and will look to find unorthodox ways to further ease policy. Last month, MNB cut RRR from 2 percent to 1 percent which injected HUF 170 billion into the banking system.

"If our assumption proves correct that the ECB will not further ease monetary policy, then this relatively dovish stance from the CB will result in EUR/HUF rising to around 320.00 during H1 2017 once the helpful effect of capital inflow following this year's rating upgrade have run its course," Commerzbank commented in its latest research report.