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GS on NBH and Inflation

HUNGARY
  • On the back of exchange rate weakness and the increase in commodity prices, GS has raised its inflation and rate forecasts across the CEE region. For Hungary, given tightly regulated energy market, as well as the cap in retail fuel prices, the direct impact from higher energy commodity prices may be lower than elsewhere.
  • However, given the extent of the increase, GS is still likely to see meaningful second-round effects. All of this comes at a time of already challenging inflation dynamics, significantly limiting policy room for the MNB.
  • GS now expects the base rate to reach at least +5.50% in Hungary, with the 1-week depo rate rising in excess of this.
  • The relatively muted FX market response to the today's hike leaves the door open for further near-term increases as well.
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