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GS on Inflation and NBH

HUNGARY
  • Inflation rose again in March, increasing from +8.3%yoy to +8.5%yoy, but surprising to the downside (consensus: +8.8%yoy).
  • Notwithstanding a more benign print relative to expectations, underlying inflation remained strong in Hungary, with core inflation rising by 1pp to +9.1%yoy.
  • On top of this, recurring exchange rate weakness, commodity price pressures and elevated inflation expectations imply that strong inflation dynamics are likely to persist in the coming quarter.
  • Taking together the strong inflation dynamics and ongoing depreciation pressures on the Forint, GS maintains its hawkish bias in Hungary and forecast that the base rate will be raised to at least +6.00%, viewing the risks to GS forecast as squarely tilted in the hawkish direction.

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