Central European Daily

Lower-than-expected Hungarian inflation, which recovered only marginally in y/y terms from January’s zero to 0.1% in February, fuels widespread expectations that the NBH cuts its rates once more. On the last rate-setting meeting, the NBH did

not rule out possibility that the monetary easing cycle would continue and we too consider decision about another cut at the next meeting on March 25 well conceivable. Nevertheless there are also other factors to be taken into account besides lack of inflationary pressures: first of all forint´s exchange rate. The Hungarian currency has lost 5 % of its value from the beginning of this year and it shown higher sensitivity to the Ukrainian crisis than most of its regional peers. Given heavy dependence of Hungary on external funding and a large volume of FX loans to be paid by households, the NBH can be quite restrained in its decisionmaking.