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 the main monetary tool moving forward.
- Since the previous meeting, the government has expressed optimism that by June at the latest, Hungary will achieve so-called “super-milestones” necessary in order to access frozen EU funds.
- Analysts are uniform in seeing no change to headline policy rates this week, with most pointing toward the pre-announced tools as carrying the load for monetary policy going forward.
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Rates are likely to remain unchanged as the central bank continues to lean more heavily on liquidity tenders and FX swaps as tools to control liquidity, tighten financial conditions and continue to work against the market’s bias to sell HUF in periods of risk-off. Analysts are uniform in seeing no change to headline policy rates this week, with most pointing toward the pre-announced tools as carrying the load for monetary policy going forward.
Both the forint and domestic bonds have displayed a sizeable rally since the start of the year in-line with the general risk-on market mood as investors anticipate a slowdown in the pace of tightening from the Fed and ECB. This has led to gains across emerging market assets, with HUF in particular benefiting from the decline in gas prices as well as the generous carry profile. Meanwhile, markets take further optimism from Finance Ministry’s confidence in unlocking frozen EU Covid funding plan and cohesion funds. However, any pivot away from the Bank’s hawkish stance could provide significant headwind to the volatile HUF and renew a sell-off in local assets.
Figure 1: EUR/HUF, Local Bonds See Support Through January 2023
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.