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NBH 'Smaller' Hikes Weigh on HUF

HUNGARY
  • On Tuesday, the NBH decided to raise its policy rate by 15bps (vs. 25bps expected) to 1.65%, in line with our expectations, following three consecutive 30bps hikes since June. The central bank also announced a further reduction in the weekly pace of QE purchases, down to HUF40bn/week.
  • According to the central bank's statement, the NBH will continue its monthly interest rate tightening cycle with lower pace (i.e. 15bps hikes) :
    • CPI inflation is now expected to average 4.6%/4.7% in 2021 and 3.4%/3.8% in 2022.
    • NBH sees GDP growth at 6.5%/7% this year (vs. 6.2% previously), and at 5%/6% in 2022.
  • The slightly 'dovish' surprise (as some participants were expecting another aggressive 30bps hike) resulted in some HUF weakness against major crosses.
  • Next important data to watch will be average gross wages and PPI inflation coming out on September 29 and 30, respectively.
  • At 9.10am (London time), central bank Governor Gyorgy Matolcsy speaks at conference.
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