Are you sure?

Hungary policy rate to stay flat “for now” after no CPI, GDP surprise, says City

Hungary's central bank is set to hold its fire over the coming months after the latest set of CPI and revised growth data came in broadly in line with consensus, London-based emerging markets analysts said after the fresh GDP and inflation figures had been released on Friday.

Analysts at JP Morgan said the structure of the 4Q/2010 GDP data showed that net trade remained the main driver of the expansion.

“Hungarian economic growth is likely to accelerate to just below 3% this year, in our view ... we expect the MNB (to remain) on hold in the coming months and (to) hike the (base) rate close the end of the year because of rising rates in Europe and more traction in recovery of Hungarian domestic demand.”

Analysts at Goldman Sachs said that price pressures are still concentrated in the non-core - food and energy - components, with no significant pass-through or second-round effects adding upward pressure to the prices of core good and services, “yet”.

This is consistent with GDP growth losing some momentum, especially in the private consumption category.

However, ”another increase in annual inflation reinforces our view that the MC will keep rates on hold at its next meeting, on March 28, despite the potentially more dovish bias of the new MC composition”.