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ING Retain Call For 8.25% Terminal Rate

HUNGARY
  • The decision fits recent communication which flagged a coming shift from aggressive to gradual tightening. On top of that, the NBH is committed to repeat these steps at its June rate setting meeting, raising the 1-week deposit rate to 7.05%. This can be seen as a new element in the forward guidance.
  • In ING’s assessment, the NBH was as hawkish as possible despite its emphasis put on graduality. In general, the decisions and communication are in line with their view. Thus ING maintain their call for an 8.25% terminal rate or even higher if inflation risks worsen for which we see a significant chance.
  • Against this backdrop, they see EUR/HUF around 390 in the short run with a possible quick move to 380 should one of the external factors (war, rule-of-law debate, etc.) show early signs of improvement, reducing the risk premium.
  • They also believe the NBH will deliver a rate cut sooner than the market currently thinks, but markets are far away to get any official remark to this to change the market direction in our view.
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