HUF: Will MNB have to intervene? - Commerzbank

The Hungarian forint's depreciation is accelerating relative to eastern European peers, especially after a negative Q3 GDP reading. Against the euro, the forint has surpassed the 405 level and seems headed towards the 410 mark. Commerzbank's EUR/HUF forecast is 415.0 for end-2025. But, this current development does not seem to be just an orderly progression towards such a target, Commerzbank's FX analyst Tatha Ghose notes.

MNB's hawkish stance is justified

"The forint is prone to greater volatility and high-beta swings during risk-off episodes, and can get somewhat out of hand, needing emergency responses by MNB. In such scenarios, exchange rate pass-through can become a dominant inflation driver - hence, MNB should like to arrest developments early."

"What we mean by intervention is that MNB might have to come out and further tweak its monetary policy guidance verbally - possibly warning about a reversal into rate hikes in case the situation worsens."

"If things were to progress in this direction, government backing in the media would be crucial. Any contradictory remarks by government officials could have a rapidly destabilising effect. Thereafter, in the event that market conditions continued to worsen for external reasons, and EUR/HUF reached say 420, actual rate hikes would become necessary. Even if they would not be strictly necessary for inflation targeting, they would be necessary for the exchange rate - because this would be the market's way of testing the central bank."