In anticipation of the National Bank of Hungary's rate-setting meeting next week, we predict a 50bp raise in the base rate
Hungary: unchanged GDP outlook with tightening on the horizon
The main event next week in Hungary is the rate-setting meeting. The situation remains delicate and although the direction is crystal clear (tightening), we are not sure exactly what to expect from the National Bank of Hungary.
Our base case is the usual combination of rate hikes: 50bp rise in the base rate followed by a 30bp hike in the 1-week deposit rate on Thursday. However, should the EUR/HUF reach 400 again and stick to this stubbornly as we approach the day of the meeting, we would add a higher probability of a more aggressive rate hike, especially taking into consideration the market pricing regarding the rates in the short run.
Alongside the decision, we will get the latest staff projections as well, where we see an unchanged GDP outlook, but an upwardly revised inflation path both for 2022 and 2023. This should nudge decision-makers into a further commitment to tighten in the second half of the year. We see an above 9% terminal rate in Hungary by the year-end.
EMEA Economic Calendar
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