The forint weakened to Ft 291.7 per euro yesterday, its lowest level so far this year, prompting some analysts to suggest that the central bank might raise interest rates in the near future. Having weakened to beyond Ft 290, the exchange rate could easily reach Ft 300 per euro, Napi Gazdaság adds.
“As the forint is at a 14-month low against the euro, it is more likely now that any change in the base rate in the next three months will be a hike rather than a cut,” said London-based analyst Neil Shearing of Capital Economics.
There is a 50% chance that the central bank’s monetary council will raise the base rate from 6.0% to 6.5% at its meeting today, as a preventive measure, Shearing added.
Societe Generale analysts go further, arguing that the market is underestimating the risks associated with Hungary and that a rate hike of two or three percentage points may be necessary if the exchange rate reaches Ft 300 per euro.
After visiting Hungary last week, Societe Generale analysts expressed concerns about the worsening global investment environment and the effects of foreign-currency mortgage repayments at below market rates.
Currency trader Pál Saághy of Equilor brokers said “further forint weakening is entirely plausible, as that is supported by the global and the unique domestic environment”.
I’ve seen some useless analyst comments in my time,
but this one takes the biscuit:
” There is a 50% chance that the central bank’s
monetary council will raise the base rate from 6.0%
to 6.5% … Shearing added.”
To rephrase it: they might, or they might not.