Commerzbank’s Tatha Ghose notes that the National Bank of Hungary (MNB) cut the implied rate on EUR liquidity swaps, effectively a 50 bp easing signal that widens the gap to the base rate. While the Monetary Policy Committee (MPC) kept the policy rate unchanged and maintains a wait‑and‑see stance, the June Inflation Report could open the door to cuts. The bank does not expect this to hurt the Forint given strong real rates and supportive politics.

NBH swap cut prefaces possible rate easing

"The National Bank of Hungary (MNB) reduced the implied interest rate on its EUR-liquidity swaps with domestic banks on Wednesday, a move widely seen as a precursor to monetary easing."

"This translates to roughly 50bp rate cut, widening the gap of the swap rate versus the main policy rate to 1pp."

"While not a formal change to the base rate, this can be interpreted as an implicit acknowledgement that the recent reduction in Hungary’s risk premium and continued well-behaved core inflation indicators creates room for eventual policy easing."

"The MPC concluded that the upcoming June Inflation Report will provide a better opportunity to assess the outlook and potentially shift to an easing stance."

"In this sense, the calming of world commodity markets will be a pre-condition for rate cuts, in our view."

"We do not anticipate a negative impact on the HUF from slightly lower interest rates, as Hungary’s real rate was quite high to begin with, and the recent election result will continue to boost the currency in the medium-term."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)