Hungary's central bank could be pressured into an emergency rate hike by potentially persistent HUF weakness but the improved macro environment would warrant a "much smaller" tightening than the 300bp hike the National Bank of Hungary (MNB) carried out in a single step in October 2008, London-based emerging markets analysts said on Wednesday.
In a research note released to investors in London, Barclays Capital's European economists said that a rate hike by the MNB is "not yet" their baseline scenario.
But the risks are "non-negligible" and when thinking about the size of a potential rate hike "we have to consider changes in the macro environment".
In 2008, Hungary was running a current account deficit, which has now been replaced by a significant surplus, equivalent to around 2.2% of GDP.
Also, the difference in real interest rates between Hungary and the EMU is wider than it was in 2008.
Finally, FX reserves are higher now than in 2008. Therefore, "we think that in order to arrest potential outflow a much smaller interest rate hike would be required ... We think that 100-150bp may be enough to limit further pressure on the forint", Barclays Capital's London-based analysts said.