City sees Hungary’s policy rate peak at 9%
Hungary's “ugly” CPI figures from May significantly raised the risks of a rate hike as early as this month and the central bank's policy rate will likely peak at 9%c, London-based analysts said.
Jacqueline Madu of Emerging Markets Economics Research at Credit Suisse in London told Econews after the CPI data release that the risk of a rate hike by the central bank in June, although not a certainty, has “definitely increased.”
She also did not rule out further rate hikes later this year. The higher-than-expected May figures mean that “the Monetary Council will stay in a tightening mode,” she added.
Asked about the possible inflationary path going forward, she said she expects inflation to stay close to 7% until the end of the third quarter, but food prices will “hopefully” start to bring down the headline numbers thereafter.
The path of oil prices and their impact remain uncertain, though, she added.
Gillian Edgeworth of Deutsche Bank in London also told Econews that the May CPI figures significantly increased the risk of a 25-basis-point (bps) rate hike in June which is now the bank's baseline scenario.
She said she expects a total of 50bps in rate hikes this year.
Asked when she sees Hungary's CPI path take a downward turn, she said any meaningful slowdown is set to be “pretty much a Q4 story.”
Dresdner Kleinwort branded the May CPI figures “ugly,” and said that while the acceleration in food and energy costs was not surprising, the magnitude of the increase was.
It said the CPI release will likely “accentuate” the policy council’s concerns over the long term outlook.
If the April earnings release, due next week, shows continuing strong growth, then the case for a 25bps hike already this month will be “very convincing,” Dresdner said, forecasting a 10% wage rise reading year-on-year.
“We expect the peak for this (monetary tightening) cycle at 9.00%, to be reached in coming months ... we see scope for a monetary loosening from early next year,” it added. (MTI – Econews)
SUPPORT THE BUDAPEST BUSINESS JOURNAL
Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.