National Bank decision: forint may start to plummet next week

Next week, the Hungarian national bank’s monetary council will hold a sitting to decide the one-day quick deposit rate. Furthermore, the Hungarian Central Statistical Office will share employment data in June and how average income changed in May. All these have crucial importance concerning the exchange rate of the forint.

According to index.hu, Hungary’s finance ministry will share detailed data on the state budget next Monday. The deficit is significant, almost HUF 3,000 billion (EUR 7.6 billion). In June, the state budget deficit rose by HUF 132.7 billion (EUR 350 million). That was the lowest number in the last eight years.

Index.hu wrote that even though salaries rise in Hungary significantly (between 11.7 and 18.9 percent), the real wage decreased by 6.9 percent since prices grew by 24 percent compared to last June.

Forint to be affected by national bank’s decision

The national bank’s monetary council will modify the one-day quick deposit rate. In June, they did not change it, so it remained at 13 percent, which was introduced last September. But they reduced the upper end of the interest rate corridor from 19.5 percent to 18.5 percent.  Read more about the June decision in THIS article.

Meanwhile, the monetary council decreased the overnight deposit rate from 17 percent to 16 percent. Next week, they are expected to continue that reduction program, which may affect the currency exchange rate of Hungary’s forint significantly. And the reason for the reduction is that the loss of the national bank became unbearable due to the high base interest rate, which also froze Hungary’s credit market.

The unemployment rate is not expected to be high in Hungary. Between March and May, the number of unemployed people in the 15-74 age group grew by 27,000 and reached 191,000. The unemployment rate stood at 3.9 percent in Hungary in May.

Will the forint get wings after the optimistic announcement of the finance minister? HERE is our article.