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NBH Limits 1W Depo Interventions as HUF Driven By Factors Outside Of Monetary Policy ‘Realm’

HUNGARY
  • Last week, we saw that the NBH decided to leave its 1W depo rate steady at 6.45% despite EURHUF surging above the 390 level.
  • The NBH has tried to limit the interventions via the 1W depo rate facility and stick to ‘monthly decision’ along with the ‘core’ policy rate.
  • Hiking too aggressively may not have any ST impact on HUF and would accelerate the economic slowdown.
  • Next meeting will be on May 31; the NBH is likely to reduce the pace of the tightening cycle on the ‘non-effective’ policy rate and raise it by 50bps to 5.9%.
  • Even though HUF is currently significantly ‘undervalued’ based on a range of fair value metrics, the forint has been sensitive to the surge in market uncertainty triggered by the renewed geopolitical tensions.
  • Hungary Consumer confidence continued to fall in May, currently standing at its lowest level since March 2021.
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