Hungarian Forint: Focus on MNB Tone Shift – Commerzbank

Commerzbank analyst Tatha Ghose expects the Hungarian central bank to cut its benchmark rate by 25 basis points to 5.50% at this meeting. However, Ghose emphasizes that, compared with the rate cut itself, the policy guidance issued by the central bank is more important for the subsequent movement of the Hungarian forint.

**Inflation Concerns Constrain Dovish Tone**

Despite an unexpected downturn in Hungary's headline inflation data, core inflation, services price pressures, and potential energy risks remain. Against this backdrop, Ghose expects the Hungarian central bank's tone to be less dovish, potentially offering conditional guidance on the future rate-cut path. This assessment aligns with the "patience and caution" stance repeatedly emphasized by central bank officials, namely that the fight against inflation is not yet over, with no clear signs of consecutive rate cuts within the year. Market reports indicate that Economy Minister Nagy has also mentioned that geopolitical conflicts could reintroduce inflationary pressures through energy prices, constituting a key vulnerability for the Hungarian economy.

**Guidance Key for Forint in Short Term**

For the forint, a stable interest rate alone is insufficient to provide adequate downside protection for the exchange rate. If the central bank can signal vigilance over inflation risks to the market through less dovish language and conditional guidance, it would help stabilize the forint exchange rate in the short term. As a high-beta currency, the forint is highly sensitive to global risk sentiment, and with the dollar trading near 310.85354 against the Hungarian forint, its direction remains largely constrained by the interplay between external conditions and central bank policy expectations.