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JPM Expects NBH To Hike 1W Depo Rate By 125bps

HUNGARY
  • The Forint has depreciated nearly 5% versus the Euro in just 3 days. This is more than anywhere else in the region, which JPM think in part exposes last week’s big bang 185bp hike for what it was, an effective 50bp move (the relevant move was 1-week depo).
  • The pace of delivery of effective tightening is clear: when market conditions are benign and the Forint is stable, proceed in small steps; when risk is off, and the Forint weakens, hike aggressively.
  • This is why JPM expects that today, at the usual 1-week depo tender, the NBH will probably hike rates by 125bps (to 9%), and leave the door open for another move the following week (depending whether FX stabilizes or not).
  • Deputy Governor Virag is cited by Bloomberg this afternoon confirming that today there will be a “decisive” hike to the 1-week depo rate.
  • This implies a new decoupling between base rate and depo, but the central bank has the option to make the two converge at the next policy meeting.
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