Preview for tomorrow's Monetary Council: raised eyebrows, some hawkish-style talk but no real action likely

HUNGARY - In Brief 28 Jan 2019 by Istvan Racz
The Monetary Council's monthly rate-setting meeting is scheduled for tomorrow. Analysts do not expect the Council to make any major step towards policy tightening, except for probably refining the language of its communiqué a bit further in that direction, which the press & news agencies might try to magnify a little bit, in order to present a story. We are part of the analyst consensus in this specific case.This expectation is fundamentally based on analysts' knowledge of the MNB's most recent statement (by vice governor Nagy on January 16), according to which the Bank would wait with further 'normalisation' (= tightening) steps to see if adjusted core inflation actually goes up to or above 3%. This could happen, in principle, as early as this month already, in which case the earliest time the MNB could act would be the February 26 rate-setting meeting.Anyway, the MNB must be cautious, given the domestic authorities' existing political rigidities, which require the maintenance of high GDP growth in the face of the currently weakening European cycle and the relatively tight course of fiscal policy. A more significant tightening immediately could do a lot for price stability but probably at the expense of significantly lower growth. In the first place, the forint could strengthen markedly, sending GDP growth to the slaughterhouse if the resulting stronger currency is sustained. The MNB is unlikely to want this; they will most probably continue to manoeuvre between lower growth and higher inflation in their usual 'slowly, slowly, gradually' way.

Now read on...

Register to sample a report

Register
Sign-in
Forgot your password?
Copyright 2024 GlobalSource Partners. All rights reserved. This is prepared for GlobalSource Partners’ clients and may not be redistributed, reproduced, stored in a retrieval system, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of GlobalSource Partners. This is distributed simultaneously to our website and other portals used by GlobalSource Partners. The information herein was obtained from various sources and is believed to be reliable but GlobalSource Partners does not warrant its completeness or accuracy. Neither GlobalSource Partners nor any Country Analyst, officer or employee accepts any liability whatsoever for any direct, indirect or consequential damages or losses rising from any use of this or its contents.