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UniCredit on NBH: Expecting NBH To Hike Core Policy Rate to 4.5%

HUNGARY
  • UniCredit expects the National Bank of Hungary (NBH) to increase its policy rate to 4.50% in its avowed attempt to reduce the gap between the policy rate and the 1W deposit rate, which is currently the operational instrument of monetary policy and sits at 5.85%.
  • The NBH will also publish a new inflation report, which is likely to include significant revisions to the inflation forecast.
  • UniCredit expects inflation to exceed 10% this year, once price caps and temporary tax cuts are removed in mid-May.
  • Moreover, UniCredit expects inflation to remain well above target in 2023 as well, as the shock in food prices is likely to continue in 2023 if Russia and Ukraine stop exports.
  • UniCredit expects rate hikes to continue due to higher inflation, with the policy rate likely to touch 6% this year and the 1W 7%, in analysts view.
  • This week week, the NBH might take a break in raising the 1W rate as implied interest rates have fallen and heavier sterilization could tighten liquidity conditions without requiring the 1W deposit rate to rise.
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