Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Executive Summary:
- Rates are expected to remain on hold at 13.0% as the NBH continues to use alternative liquidity measures as its main monetary tools.
- While there continues to be some improvement in the external risk environment (e.g., the continued drop in energy prices), the decline in the pace of inflation will largely be on base effects and its level remains the highest in the EU.
- Analysts are uniform in seeing no change to headline policy rates this week, with most pointing toward the hawkish guidance by Deputy Governor Virag earlier this month.
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In its previous decision, the NBH once held its key rate constant at 13% while highlighting that the central bank needs to see further improvement in risk sentiment before reducing the spread between the base rate (13%) and the effective rate (18%). The NBH also emphasised that its alternate policy tools (largely liquidity draining tools) have been effective and will therefore be used regularly in the coming periods.
While CPI in Hungary may be beginning to peak, the decline in pace will largely be on base effects and its level will remain the highest in the EU. The NBH will therefore be wary of any potential hawkish developments in Q2. Additionally, the unlocking of EU funds must not be taken for granted, with Hungary yet to implement all of the 27 “supermilestone” conditions set by the European Commission. These factors are expected to contribute to a ‘hold’ decision by the NBH this week, who are again likely to underline the need for an improvement in domestic conditions before narrowing the gap between the base rate and O/N rate.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.