Hungary: Monetary Council likely to keep its policy rates on hold - TDS

Analysts at TD Securities suggest that in line with the unanimous consensus, they expect the Monetary Council (MC) of Hungary to keep its policy rates on hold today. 

Key Quotes

“We also do not expect them to make any changes to their liquidity measures. However, at the December meeting the MC said that they would increasingly focus on core CPI inflation ex indirect tax effects to gauge the appropriate monetary policy response. This core measure, which was moving up for most of last year and stood at 2.9% Y/Y in December, is likely to push a bit above 3% early this year.”

“In recent comments, Deputy Governor Nagy said that core CPI at 3% or higher would be a strong signal for the start of policy normalization, which would be launched even if headline CPI inflation is below the 3% target.”

“We expect the MC to wait until the March meeting before taking any concrete measures towards policy normalisation. However, we think the MC might use more hawkish language in its press statement today, perhaps echoing Nady's comments.”