No rate hike today, analysts expect slightly lower CPI-inflation for December

HUNGARY - In Brief 13 Jan 2022 by Istvan Racz

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The weekly deposit tender is held by the MNB today. The fixed interest rate for the tender was set at 4% again, unchanged from last week. Looking at the forint's position at EURHUF 355, the lack of any further rate hike this time is genuinely unsurprising. Indeed, the forint has appreciated sharply, by 14 units against the euro, since end-December. There is no evident fundamental reason for this domestically. So the forint's sudden appreciation can be explained in part by the turn of the EURUSD trend in early January, and in part by the development of positions on the forint market, which we only partially see. What we see regarding the forint market is (part of) MNB activity, regarding which there is one notable event. In the second half of December, the MNB sold a record high amount of euros in reverse EURHUF swaps, and it further narrowed HUF liquidity by activating its new instrument, the short-term discount bond. Although all these reverse FX swap contracts and the discount bonds matured on January 6, this action may have served as a catalyst in turning the tide on the forint market.Tomorrow, CPI-inflation for December will be reported. Portfolio.hu's analyst 'consensus' (actually the median forecast) expects 7.1% yoy, down from November's 7.4% yoy, on moderating fuel prices, although analysts seem to agree that the domestic inflationary pressure keeps building up. Our own guesstimate is 7.3% yoy, but the important thing is that the headline figure is broadly expected to fall somewhat from November's peak value.