Are you sure?

MNB unlikely to change key rate today - poll

Hungary will probably leave its benchmark interest rate unchanged for a seventh month as Europe’s sovereign debt crisis weakens the forint, threatening defaults on foreign-currency loans and slower economic growth, reports Bloomberg.

Hungary's national bank MNB will keep the two-week deposit rate at 6% today, according to all 20 economists surveyed by Bloomberg. The decision will be announced at 2 p.m. in Budapest, with central bank President Andras Simor scheduled to comment at 3 p.m.

“The current volatility in the forint will hinder a move any time soon,” Salomon Guillaume, emerging-market strategist at Societe Generale SA in London, wrote in a note to clients yesterday. “We have little doubt that a rate cut is on the cards in the autumn as long as the forint can regain some of its recent losses.”

Investors have increased bets on a rate cut, with the six- month forward-rate agreement trading 43 basis points below the 3-month Budapest Interbank Offered Rate, or Bubor, on Aug. 17, the lowest in a year, from 3 basis points below after the last rate decision on July 26. The spread was minus 35 basis points yesterday. A basis point is 0.01 pp.

The franc’s gains may trim growth by as much as 0.5 pp, Prime Minister Viktor Orbán’s chief of staff, Mihály Varga, said in an interview published July 22 on the website of Gazdasági Radió. Growth this year may be about 2%, less than the government’s initial 3.1% forecast, Orbán said last week.

The inflation rate fell to 3.1% in July, the lowest since March 2009, from 3.5% in June. Inflation may undershoot forecasts this year, according to Orbán. The central bank expects 2011 inflation to average 3.9%.