MNB is widely expected to keep following its pre-signalled rate path and cut the rate corridor once again by 75 bps today.

Hungarian core inflation YoY rate of 9.1% is still near the double-digit mark. Nevertheless, this is of less concern now as the MoM core inflation rate has returned roughly to historical range. If MNB were to maintain a higher than 9% interest rate through Q1 2024 for example, that will translate to a decently positive real interest rate, which should support the Forint.

The risk premium on the Forint will stay elevated, but MNB will carry on with monetary policy normalisation regardless.