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Goldman Sachs, JP Morgan Post-CPI NBH Views

HUNGARY
  • Goldman Sachs say the weak inflation print could be partly explained by administrative measures that are pushing retailers to actively lower prices. Nevertheless, the print, combined with ongoing strong performance of the HUF, bodes well for the NBH to continue with its 100bp cuts to the 1-day deposit rate at the next MPC meeting.
  • While Goldman Sachs maintain their view that Hungary will face challenges in achieving its inflation objective in a sustainable manner while wage growth continues to track at an elevated pace, in the near-term, they think that the balance of risks is skewed towards a faster-than-expected disinflation in headline inflation.
  • JP Morgan say the continuation of disinflation dynamics should encourage the NBH to proceed with its 100bp/month easing cycle until September. After that they see a pause, as core inflation will still be too elevated, with the NBH starting base rate cuts in early 2024 only.
  • However, they say there are risks disinflation comes faster than their forecast which would allow the NBH to cut the base rate already in 4Q23. Another option would be for the central bank to step up the pace of rate cuts in the next few months given the better-than-expected inflation data.
  • However, JPM think the bar for accelerating the 100bp/month cut pace is rather high, and would require even stronger downside surprises to CPI, ideally including lower moves in core services too.
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