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COUNTRY INSIGHTS

No surprise from the Monetary Council today
HUNGARY · In Brief · 25 Jul 2023

Fully in line with analysts' widespread expectation, the Council decided to reduce the O/N deposit rate by 100 bps, to 15% today. Simultaneously, the repo rate was cut to 17.5%. The base rate remained unchanged at 13%. By meeting the unanimous analyst expectation, the Council actually met two of ...

Sterilisation rate is expected to drop to 15% tomorrow
HUNGARY · In Brief · 24 Jul 2023

The Monetary Council is set to meet tomorrow. Analysts in Portfolio.hu's poll unanimously expect a 100 bps reduction of the O/N deposit rate, the effective sterilisation rate, to 15% on this occasion. The poll's median expectation for December is 10.5%, based on the generally shared optimistic fo...

Another warning from the EU Commission
HUNGARY · In Brief · 20 Jul 2023

It is always difficult to tell what causes any particular move by currency exchange rates. But as regards the forint's most recent weakening against both EUR and USD over the last two days, it can be rather safely said that a new warning from the EU's budget commissioner Johannes Hahn played some...

First time the BOP is indeed improving: a quick look at the preliminary May data
HUNGARY · In Brief · 18 Jul 2023

The following table gives you the key elements of the BOP for January-May, as % of GDP (sources: MNB, KSH): Clearly, there were improvements on all of the trade balance, the current account balance, the net financing requirement and the basic balance, despite the deterioration reported on net fac...

S&P affirmed BBB-/Stable, but watch out for the details
HUNGARY · In Brief · 09 Jul 2023

On Friday, July 7, S&P did not change its Hungary sovereign credit rating, exactly as expected. This could be taken as completely market-neutral, but the agency's appraisal was not entirely innocent this time. S&P actually said that its Hungary macro forecast is based on the assumption that the E...

Disinflation met positive expectations in June
HUNGARY · In Brief · 07 Jul 2023

CPI-inflation for June was reported this morning exactly as private sector analysts expected, at 0.3% mom, 20.1% yoy, falling from 21.5% yoy in the previous month. In fact, this was also the figure expected by the MNB for June in its recently issued Q2 inflation report, and it was only moderately...

Forint weakness is driven by EU report, budget, weak retail sales and industrial output
HUNGARY · In Brief · 06 Jul 2023

The forint suddenly weakened by some ten units or close to 3% against both EUR and USD over the last 24 hours. In a longer term perspective, this is not surprising, as EURHUF has become increasingly contractionary over the recent months: in June, its daily average level of 370.72 meant a 6.6% yoy...

PM Orbán is sailing against the winds in the EU once again
HUNGARY · In Brief · 02 Jul 2023

The EU Council held its semiannual summit meeting on June 29-30. The European media is full of the story that Hungary, this time together with Poland, the other usual suspect, once again blocked the consensus at the meeting. And yes, that is right, although the summit itself played a role only at...

Revised figures out for Q1; the cumulative BOP picture looks better
HUNGARY · In Brief · 27 Jun 2023

The difference between preliminary and final (revised) BOP data tends to be significant, the main difference being that in the final (quarterly) data, much of the (normally big) errors and omissions balance (deficit) gets distributed between various parts of the BOP. And so it happened this time ...

Fitch Ratings affirmed its BBB/Negative rating for Hungary on Friday
HUNGARY · In Brief · 25 Jun 2023

Even though Fitch changed its BBB rating outlook from Stable to Negative in January, mainly on deficiencies of structural policy, and it said a few weeks ago that it still saw downgrading risk for the country, no downgrade took place this time. As suggested by its report, Fitch Ratings was appare...

CPI-disinflation accelerated in May
HUNGARY · Report · 23 Jun 2023

The outlook on energy prices remains positive, despite a substantial upward correction in recent weeks. Save for the case of a major disruption of the supply flow, energy import costs are still bound to fall by a lot this year. Recent data on gas reserves and energy conservation is impressive. Op...

MNB's Virág is hinting on the future path of rate cuts
HUNGARY · In Brief · 20 Jun 2023 · 1 response

At today's rate-setting meeting of the MNB, everything went as expected. The Council decided on a uniform 100 bps reduction of the O/N deposit rate, the repo rate and reverse FX swaps, leaving the base rate and the low end of the interest rate corridor unchanged. Mainly, the O/N depo rate (= the ...

Sterilisation rate expected to fall by 100 bps to 16% tomorrow
HUNGARY · In Brief · 19 Jun 2023

The regular monthly rate-setting meeting of the Monetary Council is scheduled for tomorrow. This time around, the Council is also set to discuss the Q2 inflation report. Analysts unanimously expect another 100 bps reduction of the O/N deposit rate, which is the effective sterilisation rate. For D...

More clarity about the MNB's balance sheet and its impact on the government budget
HUNGARY · In Brief · 15 Jun 2023

Even though the MNB reports what is called its statistical balance sheet monthly, it is essentially impossible to tell from that by how much the government will have to recapitalise the Bank and when, in view of the latter's losses suffered because of its current sterilisation policy. The reason ...

Economy Minister Nagy is proposing to consider raising the medium-term inflation target
HUNGARY · In Brief · 12 Jun 2023

Economy Minister Nagy, formerly MNB vice governor, published an article in today's daily newspaper Magyar Nemzet, raising the idea to set a higher medium-term inflation target than the MNB's current 3%, with a 2-4% tolerance band. Explaining his idea, he referred to upcoming structural changes on...

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