Today's meeting of the National Bank of Hungary (NBH) is the main event of the week in the CEE region. Our economists expect rates to remain unchanged, but as we discuss in this NBH preview, the odds of unchanged rates versus a 25bp rate cut are almost even, ING’s FX strategist Frantisek Taborsky notes.

Expect a dovish rhetoric today

“Of course, the downside surprise in inflation, the strongest HUF since late May, and the dovish shift in the global story will make it tempting for the central bank to cut rates. In any case, in this context, our economists have already revised the rate path from flat rates to two 25bp cuts this year.”

“So, regardless of today's decision, we expect dovish rhetoric despite the central bank trying to paint a cautious approach. We see this in market pricing and surveys which are also rather balanced but still favour a 25bp rate cut today. As always, we should see a decision at 1400 local time today and a press conference an hour later.”

“We expect dovish rhetoric today. Given the relatively strong HUF levels, this rhetoric should be negative for the currency. Rates pricing has moved massively down the curve over the past three weeks, most notably across CEE peers, and for some time now the narrower interest rate differential has pointed to a weaker HUF. So, today's meeting could be a trigger and we are bearish on HUF here.”