(Bloomberg) -- Hungary is poised to hold its key interest rate for a second month to support the forint after Donald Trump’s election win triggered one of the steepest currency declines in emerging markets.
The National Bank of Hungary will keep the benchmark interest rate at 6.5% on Tuesday, according to all 21 economists in a Bloomberg survey. That would leave it tied with Romania for the highest key rate in the European Union. The decision will be announced at 2 p.m. in Budapest, followed by a statement and a briefing an hour later.
Uncertainty about the Federal Reserve’s interest-rate path and potential tariffs by the incoming Trump administration caused the dollar to surge and emerging-assets like the forint to weaken. Hungary is in particular focus because of a strained budget, an ongoing recession and the country’s reliance on the car industry, a potential target in a trade war.
The forint’s plunge pushed the central bank to abandon a brief attempt at restarting monetary easing, despite inflation hovering close to policymakers’ 3% target. Deputy Governor Barnabas Virag said last month that rate-setters were ready to keep interest rates unchanged for a “sustained period.”
The forint has dropped about 2.5% against the euro since October to close to a two-year low, the worst performance among European emerging-market peers.
Investors have pared rate-cut bets and now expect less than two quarter-point reductions to the key rate over the next six months, according to forward rate agreements. They even briefly speculated on rate hikes in Hungary after Trump’s win sent the forint into a tailspin.
Traders will be on the lookout for any indications from the central bank of a potential readiness to tighten monetary policy should the forint slip further from its current levels.
--With assistance from Harumi Ichikura.
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