Monetary Council tomorrow: no rate change expected

HUNGARY - In Brief 24 Mar 2025 by Istvan Racz

---

This will be the first regular monthly rate-setting meeting chaired by Mr. Varga. In addition, it will be the one to discuss the Q1 inflation report. So, a really important event to watch anyway. Importantly, analysts are unanimously predicting no rate change from 6.5%, according to Portfolio.hu's poll. We agree. They also expect 6.25% for the base rate at end-December. We also agree, adding that no rate change whatsoever is likely until end-September. In the Q4 inflation report of December, the MNB expected 3.7% average inflation (CPI, headline rate) and 3.1% real GDP growth for 2025, taking the midpoint of their forecast ranges. This time around, they are more than likely to go higher with their inflation forecast and to lower their growth expectation. Analysts currently expect 5% average inflation  for this year. Hence their base rate expectation: they see no room for further loosening in the forthcoming few months at all: instead, they believe that the MNB's main task now is to break the most recent uptick by inflationary expectations. With very much the same conclusion, we would say that the Bank's current key task is to keep the forint stable around EURHUF 400 until end-September, and the government's key task is not to undermine nominal exchange rate stability. Growth will do whatever will be possible in this period; even for somewhat longer term growth prospects, very short-term growth results will likely be of secondary importance, compared to efforts to improve domestic price stability further. We explained this view in more detail in our March monthly report, published on Friday last week. On the government's recent administrative measure to contain food pri...