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Analysts expect base rate at a max of 7.5% by end of year

Hungary's key-interest rate will likely drop to between 7% and 7.5% by the end of the year, analysts told MTI, noting that three-month interbank futures rates are at 7.5%, while six- to nine-month futures are at around 7%.

Gergely Fórián Szabó of Pioneer Investments said that the MNB's seemingly bold Monday rate cut actually entails little risk, adding that he, along with most others, expected the National Bank of Hungary (MNB) to reduce rates by only 50 basis points.

Fórián predicted that the key-interest rate would be 7.5% at the end of the year.

K&H Bank lead analyst György Barcza, who also predicted that the MNB would cut rates by 50 basis points, remarked that the MNB’s rate-decision is not compatible with predictable monetary policy, adding that the decision entails the danger of forcing the MNB into a rate-cutting spiral as a result of a potential further strengthening of the forint.

Barcza said that Hungary's improving current-account and the resulting rise in demand for the forint could underpin further strengthening of the Hungarian currency. Barcza said that the forint's potential further strengthening is now a source of greater concern than its possible weakening, while Fórián Szabó deemed the latter possibility to represent a greater risk. (MTI - Econews)