Forint at 5-month low!
It appears that the Hungarian National Bank has opted for a different strategy compared to its recent approach. Instead of prioritising the protection of the Hungarian national currency against exchange rate declines, they aim to stimulate the economy through a low base interest rate. Consequently, the Hungarian forint hit a five-month low yesterday and shows no signs of imminent recovery.
As detailed in THIS article, the Monetary Council of the Hungarian National Bank voted for a 100 basis points decrease yesterday. This is welcomed news for those seeking to borrow money, as loan interest rates are expected to decline soon. However, it could spell trouble for the HUF/EUR exchange rate.
With the Hungarian National Bank shifting its focus away from solely safeguarding the Hungarian forint, the significant reduction in the base rate may lead to the breach of the HUF 395/EUR level, possibly strengthening to the psychological limit of 400/EUR.
Analysts at the Egyensúly Institute have forecasted that the Hungarian forint will likely remain above the 400/EUR threshold in 2025.
Deputy Governor of the MNB, Barnabás Virág, said yesterday that the acceleration in the pace of base rate reduction was a temporary measure, as reported by portfolio.hu. However, this has failed to reverse the trend of forint weakening.
By evening, the forint had even reached HUF 391/EUR. Now it stands at 391.2/EUR.
Read also: