A mixed local picture, less than three weeks before Election Day

HUNGARY - In Brief 16 Mar 2022 by Istvan Racz

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First and foremost, the weekly 1-week deposit tender is due tomorrow. At present, the forint is doing OK at EURHUF 370, thanks to some improvement with Russia/Ukraine and more with energy prices. Yet we believe the MNB cannot stop entirely with interest rate hikes, as the currency market is set to remain quite volatile and inflation prospects are indeed ugly. For us, this means a 25-30 bps rate hike tomorrow, from 5.85% of last Thursday. But another +50 bps this time is not at all excluded.Second, pipelines are apparently unhurt, and Russian gas and oil keeps flowing westwards into Hungary. As import prices fall, domestic fuel prices for wholesale customers are going to be cut by HUF40 to HUF591 for gasoline and by HUF70 to HUF641 for diesel, getting much closer to the administrative ceiling of HUF480 for household and retail customers (all on per litre basis). The administrative price freeze appears to be sustainable for now: the bulk of it is covered by MOL, the sole remaining big wholesaler, and MOL is compensated by the currently USD28 per barrel discount on Urals crude against Brent. So essentially Russia is paying the bill at present.One significant remaining problem is the availability of MOL's productive and transportation capacity, compared to national demand. MOL and the government claim this will be sufficient, whereas others, including experts, say it is not. Anyway, MOL and the government have been helped out by a 4-day extended weekend, March 15 being a national holiday. On such occasions, fuel consumption tends to be low, just as it happened this time as well, providing MOL with precious time to catch up with demand. But even so, about 150-200 petrol sta...