MNI NBH WATCH: Rates Seen Held At 6.5%, Tone To Stay Hawkish

The National Bank of Hungary is once again expected to keep its base rate on hold at 6.5% in August, with Governor Mihaly Varga reiterating the need for a patient and disciplined approach to monetary policy in line with previous comments and his remarks at Jackson Hole. (See MNI EM NBH WATCH: Base Rate Held At 6.5%, Stance Confirmed)

Headline inflation came in at +4.3% in July (+0.4% month-on-month), and while core inflation moderated, to +4.0%, in part thanks to slowing services inflation, the pace of price growth is expected to stay above the upper bound of the NBH’s tolerance band for the rest of the year.

CPI inflation is only likely to increase should government price shields be phased out  at the end of this month, raising the likelihood that they will be extended. Growth remains a source of growing concern. But with the NBH keen to maintain currency stability the message from Budapest will stay hawkish. (See MNI INTERVIEW: Hungary Outlook Stagflationary - Ex-NBH's Reiff)