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Central bank seen boosting base rate to stop forint plummet

Analysts surveyed by Origo news portal say that the Hungarian national currency is nearing levels of weakness when the central bank MNB may be forced to raise the base rate.

Households indebted in foreign currencies are already in a tough spot, but the situation could also turn for the worse in the case of forint-denominated solutions. The portal’s survey found that if the forint should weaken to 300-320 against the euro, MNB would be highly likely to raise the benchmark indicator.

Following the breakdown of talks between Hungary and the International Monetary Fund over disputes about the government’s fiscal steps, the forint began to slide, at times being traded over 290 against the euro.

Following a rate-setting session on Monday when the base rate was unchanged, MNB governor András Simor already hinted that recent developments might compel the central bank to backtrack on its recent campaign of base rate cuts and instead ponder a hike.

MNB has already stated that it is ready to commit €2.2–3 billion in EU funds to enact a “silent intervention”, using the amount to buy forint on the market and thereby shore up the national currency. News sources say this has already started. (BBJ)