Hungary's policy rate may lower to 1.4%

Central bank of Hungary cut its banchmark rate from 1.65% to 1.5% yeasterday. Based on the rate cut, Commerzbank lower the policy rate forecast from 1.5% to 1.4%.

The state-ment pointed at the possibility of a further small cut, which makes it more than likely that the MPC will use the opportunity of the next meeting to cut rates.

"There were numerous other signals that the easing cycle is near its end - hence, we forecast just one more 10bp cut as our base scenario. We have been using 1.4%-1.5% as our working interval for the policy rate, hence the change does not materially impact the 315.00 end-2015 EUR-HUF forecast", according to Commerzbank. 

In its new Inflation Report, the CenBank fine-tuned growth and inflation forecasts slightly: it revised higher its 2015 GDP growth forecast from 3.2% to 3.3% (2016 was left unchanged); and it revised higher its 2015 inflation forecast from 0% to 0.3% - the inflation revision is more significant as it captures the changing mood about deflation around the Eurozone, notes Commerzbank.