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Commerzbank sees 0.75% base lending rate by yearʼs end

Ratings

The central bank will cut the base lending rate from its current 1.2% down to 0.75%, GDP growth will slow and the value of the forint will drop, Commerzbank predicts in its April “Economic and Market Monitor” report, released yesterday.

A chart predicting the forint exchange rate from Commerzbankʼs April report.

The report predicts that Hungary’s GDP growth in 2016 will slow to 2.2%, down from last year’s 3%, but adds that a ratings upgrade by an agency like Moody’s or Fitch is still possible.

“The story of Hungary’s credit rating being upgraded to investment grade this year remains alive, although the emerging market sell-off during January-February appears to have made rating agencies reticent,” the report said.

The report said its prediction of a rate cut was based on the Hungarian National Bank (MNB) changes in their inflation forecast, and added that the cuts could drive down the value of the forint.

“The combination of slower growth and monetary expansion by the central bank is likely to push EUR-HUF up to 320.00 levels by year-end,” the report said.

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