Interest rates in Hungary not expected to change until Q4 2016

Analysis

Hungary is likely to keep interest rates on hold "as long as possible," Citigroup said in a note on Wednesday. It forecasts that Hungary will keep rates unchanged until at least the fourth quarter of next year, and raise them "only very gradually" thereafter.

 A hawkish shift in Fed policy outlook and/or a deterioration in Hungaryʼs strong current account surplus could force Hungary to raise rates earlier, Citi said.

Given that mortgages, following their conversion earlier this year from foreign currencies into the local currency, are benchmarked to the three-month Budapest Interbank Offered Rate, or Bubor, central bank rate increases may become a politically sensitive issue ahead of Hungaryʼs next parliamentary elections, due in spring 2018, Citi said.

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