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Weaker forint does not necessarily mean end to rate cuts - City analysts

  Emerging market analysts in London told MTI on Tuesday that the forint’s sharp weakening past 300 to the euro would not necessarily put and end to the National Bank of Hungary’s (MNB) campaign of rate cut, because disinflationary forces still exceed the effect of the forint’s weakening on inflation.


Neil Shearing, an economist at Capital Economics, told MTI that the NBH would cut the base rate to 6.00% from the current 9.50% by year-end as the economy could contract by as much as 5% and demand is set to fall markedly, making it likely the inflation target will be undershot.

Asked whether the weaker forint could bring disinflation to a halt, Shearing said the forces placing downward pressure on inflation were much greater than the effect of the softer forint pushing prices up.

Analysts at Goldman Sachs London office wrote that the weaker forint presents serious inflationary risk, but these are largely offset by disinflationary effects. The analysts put the MNB base rate at 7.00% by year-end. (MTI-Econews)