Therefore, the tightening cycle that started in July will be continued on a monthly basis, though at a slower pace.Continue reading
The Hungarian Central Bank (MNB) successfully combatted the rising inflation level by raising interest rates, allowing the country’s national currency, the forint (HUF), to stabilize around 360 forints per euro. According to analysts, this trend may continue. However, the upcoming parliamentary elections set to be held in Hungary in the spring can always bring about a certain degree of uncertainty.
This article was originally published on our sister-site, Ungarn Heute.
In the article “Poland’s Central Bank Becomes More Aggressive,” the Frankfurter Allgemeine Zeitung analyzes the reaction of the central banks of Central European countries such as Poland, the Czech Republic, Hungary, and Romania to rising inflation. While Warsaw’s central bankers had reacted somewhat hesitantly to their high inflation rate of 7.8 percent, their Czech and Hungarian counterparts quickly took the necessary measures. Raising interest rates to 2.4 percent led to a stabilization of the Hungarian currency, with rates currently around 360 forints per euro. In this regard, the article also notes that these four countries – despite being EU members – do not intend to adopt the euro in the foreseeable future.
Meanwhile, in the Hungarian pro-government business newspaper Világgazdaság, analysts have predicted that the forint may even become one of the best investments of 2022 as a result of further strengthening. While in 2021 the Hungarian currency was one of the worst-performing among the emerging markets against the dollar, 2022 can be the turning point in which the domestic currency can strengthen further as a result of falling inflation and further interest rate hikes by the central bank. As a result, the exchange rate per euro may fall from the current 360 to 355 forints.
According to the senior analyst of KBC Equitas, the forint did not have such a bad year last year. Norbert Cinkotai recalls:
In January 2021 the exchange rate was 362 forints, and at the end of December, the euro was 370 forints, which amounts to stagnation. It is true that the attempts to strengthen the forint in the summer were not sustainable. This year could be better, but a significant increase is certainly not to be expected,”
his forecast concluded. The beginning of the year is seasonally favorable for the Hungarian currency. Moreover, the forint is not expected to fall further due to the upcoming general elections, as the extremely weak local currency could become an election issue, which would be far from favorable for the current government.
In the spring around the elections, there could be some turbulence surrounding the Hungarian currency, but the fact is that the market likes nothing better than a stable government with strong support, added Cinkotai, who expects the euro-forint rate to move between 355 and 360 by the end of the year.
At the same time, Gábor Török, an analyst at Raiffeisen Bank, said that more risks could fall out of the system in the coming period. For example, this year could see the end of the COVID-19 epidemic, which would increase financial risk-taking, leading to a positive effect on the forint as well. However, elections always bring about some risk. So overcoming the uncertainty before this year’s election is something positive in itself.
Featured photo via Pixabay
