National Bank of Hungary likely cut benchmark rate by 15bp today

Hungarian inflation is likely to accelerate during 2016: there are obvious base-effects from utility price cuts, which are now beginning to boost inflation; and NBH forecasts core inflation to accelerate to 3% during 2016, notes Commerzbank. At such inflation rates, the Hungarian real interest rate will be modestly negative through 2016.

Comerzbank expects the NBH to cut its benchmark rate by 15bp to 1.5% at today's MPC meeting. NBH is unlikely to "officially close" the cycle as the Polish CenBank did; but it makes sense to assume a bottom for Hungarian rates at around 1.4%-1.5%. 

Based on the rate of infaltion, Commerzbank forecasts EUR-HUF to rise towards 325.00 next year; and while the NBH will have no problem with this rise in EUR-HUF, there is a risk of sharp spikes in EUR-HUF during a year when global interest rates are set to rise.