Two forint-negative events are reported today

HUNGARY - In Brief 17 Jan 2024 by Istvan Racz

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MNB's Mr. Virág spoke at Euromoney's conference in Vienna today. He gave a pretty specific guidance on the prospective path of the Bank's interest rate policy for the next six months. He said that the Council may speed up rate-cutting to 100bps per month at its next meeting on January 30, as currently there is roughly the same amount of arguments for a 75bps and a 100bps cut on that occasion. He also said that the current market pricing, which indicates that the MNB base rate may fall to 6-7% by mid-year is realistic. This is clearly a verbal intervention from the MNB, indicating that the Bank is optimistic about inflation prospects. Many on the market will bring this together with the economy minister's repeated claims that the MNB is too cautious about interest rate policy, and they should proceed faster. Minister Nagy is apparently worried about the existing weakness of the economy (in terms of both domestic and external demand, we guess), which is his job, of course. But staying with the MNB, they predicted CPI-inflation to go down to 4.6% yoy by March in their Q4 inflation report, which is the last month going forward on which they gave a specific forecast. It sounds realistic: we have 4.5% yoy inflation for March in our own model table. However, it is also to be noted that the period of the current rapid downtrend of inflation will most likely end by February (also expected this way in the MNB's forecast), as the powerful supporting factors behind this trend in recent times will have faded away by then. At this point, we are pretty much convinced that inflation is unlikely to go any further down in the rest of 2024. For June, when we currently expect 5.1% yoy inf...