Will the Bank of Hungary change sides today? Analysts are betting on a rate cut

Analysts predict that at today's meeting the Bank of Hungary will start easing monetary policy, cutting the one-day deposit rate, while maintaining the main rate in Hungary at the current level.

The forint is growing stronger

The Hungarian forint, which, like the zloty, has been strengthening since autumn 2022, in May was the strongest against a basket of currencies since Russia's aggression against Ukraine. For several days, however, it has been under pressure from sellers.

Today, the Hungarian currency is weakening against the euro and other major currencies. EUR/HUF rises to 376,38 from 373,57 yesterday at the end of the day, correcting the declines from the first half of May and again attacking the 50-day average. Breaking the latter, which failed last Friday, would be a significant demand signal. So strong that there would be a risk of breaking the resistance at 380,24 (local peak on April 20), which would open the way for EUR/HUF to the area of ​​388,90 (bear line).

EUR/HUF chart, daily time frame. Source: Tickmill

Whether the 50-day average on the EUR/HUF daily chart will be broken will probably be decided after 14:00 today. It is then that investors will learn the decision of the Bank of Hungary on interest rates. This is the most important event of the week, and perhaps even the month, on the forint market.

Interest rates in Hungary will fall?

Analysts predict that despite the very high inflation in Hungary (24 percent y/y in April), the central bank is ready to ease monetary policy. They expect the Bank of Hungary to keep the main rate at the current level of 13%, but at the same time to lower the one-day deposit rate by 100 basis points (bps) to 17%. from the current 18 percent.

Analysts expect that this step will be repeated at subsequent meetings and, as a result, this autumn. the one-day deposit rate will fall to 13 percent. and thus aligns with the main foot.