MNB base rate down 75 bps to 12.25% today

HUNGARY - In Brief 24 Oct 2023 by Istvan Racz
Neither us, expecting 12%, nor the median analyst expectation of 12.5% have proven to be right. The reduction of the monthly pace of the sterilisation rate cut seems to be meant to indicate that: - for the next few months, the yoy inflation rate will still very likely fall following a steep trend, helped by the continuation of big and favourable base effects until January;- but after January, achieving any further disinflation will most probably become very difficult, because of the strengthening of domestic demand, mainly on the generous wage arrangements expected for next year, and a number of other factors. We expect the headline inflation rate down at 6% yoy in January, and only marginally lower, if at all, in the rest of 2024. There is a good chance now that the sterilisation rate will be cut by 75bps each month in Q4, reducing the rate to 10.75% by end-December. If nothing extraordinary happens until then, we mean. 

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