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SocGen: Expect 75bps Hike, Further 75bps Hikes in October and November, 50bps in December

NBH
  • SocGen expect a 75bps increase to the base rate and to the 1w depo rate, which would raise both rates to 12.50%. They forecast two additional 75bps hikes in October and November, as inflation is likely to accelerate further, and a final 50bps hike in December, bringing the policy rates to 14.50%.
  • However, even this level of tightening is unlikely to prevent a further depreciation of the forint, in SocGen’s view, and they continue to forecast the EUR/HUF at 430 by year-end.
  • Deputy governor Barnabas Virag suggested recently that the monetary council is weighing up the possibility of slowing down or ending the tightening cycle. Virag argued that the pro-inflationary nature of domestic demand is set to diminish going forward, and that the recent rate hikes and measures to mop up free liquidity should act to curb inflation pressures
  • The MNB will discuss and release the new inflation report and forecast at the upcoming meeting. SocGen believe this will be an opportunity for the monetary council to slow the pace of rate hikes, as per Virag’s comments.
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