After last year's recession, we expect economic growth to start gradually in Hungary. The most important drivers of this may be the recovery of household consumption and the improvement of net exports. The growth of industry and investments may be quite small. We expect a surplus in the external balance, but the outlook for public finances is not reassuring. Inflation can fluctuate around 4%, the exchange rate of the forint against the euro expected between 390-400. |
The National Bank of Hungary reduced key rate by 75bp to 8.25%. The importance of the exchange rate channel is emphasized. Going forward the slow down of the rate cut cycle is announced. In Q2 we expect another 100-125bp rate cut, and only 50-75bp cut in H2. We forecast 2024 year-end key rate at 6.5%, |
Inflation surprised again on the downside - headline annual figure decreased to 3.7%. Overall inflationary pressures are lower than previously assumed, while weaker HUF and expected consumption recovery could add some additional pressures. We have changed our 2024 average inflation forecast to 3.8% from above 4%. |
The National Bank of Hungary delivered a 100bp rate cut - base rate is reduced to 9%. The pace of the rate cut was increased from previous 75pb. Macro fundamentals supported (and have been supporting even earlier) the larger cut, and this time market noise was not considered as an obstacle. The actual size of the next rate cuts is a bit foggy, but expectations of 6-7% base rate by the end of Q2 is confirmed by the central bank. We keep our forecast of 5.5% base rate by the end of 2024. |
Inflation surprised on the downside once again with 3.8% yoy headline data in January. It is already within the central bank inflation target band (inflation target is 3% understood in a +/-1% tolerance band). Fundamentals do support the speed up of the rate cut cycle. Key rate is seen 6-7% by mid-year and 5.5% at year-end. |