The decision by the National Bank of Hungary (NBH) today to keep interest rates on hold at 7% was widely expected, with a narrow majority of policymakers now seemingly willing to wait and see whether or not the government can strike a new deal with the IMF. The key issue, then, is whether the government will deliver. While many are starting to price in interest rate cuts over the coming months, we fear the path ahead will be much more difficult and would not be surprised to see the NBH forced into further rate hikes in order to defend the forint.
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