Economy
ANALYST VIEW - Hungary MPC to hike rates further if CPI outlook, risk perception fail to improve
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Gábor Ambrus, 4Cast, Sofia
“We do not find much novelty in the minutes of the November rate setting meeting, the essence was well contained already in the statement and the presser on the day of the rate setting meeting. What is worth highlighting maybe that some members saw the rate hike justified already on CPI grounds as well (while others mainly on the worsening of Hungary's risk metrics) while other members said they would prefer to wait for the December CPI report to decide."
“The MPC reiterated its earlier message that the forint is undervalued compared with its fundamentals, though it did not step up the rhetoric in any visible way that would indicate open market operations would be closer."
“The voting was unanimous, this was known since the presser, though back then Governor Simor said the initial discussion was about more options just this was the only proposal officially tabled."
“The MPC said it stands ready to hike further if needed but it does not show great urgency to do so - we are hence not convinced that they will follow up with another hike in December -though much can change on markets in the reminder- and even if they do, it is more likely to be a 25bp move."
Peter Attard Montalto, Nomura, London
“The minutes confirmed that the focus of the discussions (which led remember to a unanimous hike) were on risk premia, if it was external only or both external and internal, and also on the inflation outlook, if they should look at core remaining under control or if there would be pass through from headline or if they should just be looking at strong headline pressures."
“An overall majority was found for seeing domestic led risk factors as well as general concern over inflation (though disagreement over exactly what to be looking at). The MPC seemed to mark themselves against their previous, inter-meeting, statement on both the inflation and risk fronts. Indeed it is made clear, and agreed by all members of the MPC, at the end of the minutes (similar to the post MPC statement) that "if the outlook for inflation did not improve and risk perceptions did not decline, monetary conditions might be tightened further"."
“We think there is about to be a sharp acceleration in inflation into the new year and that core ex VAT rates will increase also (though more slowly) whilst at the same time the potential for further external risk deterioration after this week's EU summit through till we get ECB QE in H1 next year that there there is still room for additional hikes in December and January taking us up to 7.50%."
“Importantly in this regard the minutes again make clear that whilst the currency moves (and volatility) are important a wider range of risk premia measurements are also important and still look distressed to us. As such both the risk premia and inflation items on the MPC "check list" will remain ticked and hence a view of hikes."
“We do not find much novelty in the minutes of the November rate setting meeting, the essence was well contained already in the statement and the presser on the day of the rate setting meeting. What is worth highlighting maybe that some members saw the rate hike justified already on CPI grounds as well (while others mainly on the worsening of Hungary's risk metrics) while other members said they would prefer to wait for the December CPI report to decide."
“The MPC reiterated its earlier message that the forint is undervalued compared with its fundamentals, though it did not step up the rhetoric in any visible way that would indicate open market operations would be closer."
“The voting was unanimous, this was known since the presser, though back then Governor Simor said the initial discussion was about more options just this was the only proposal officially tabled."
“The MPC said it stands ready to hike further if needed but it does not show great urgency to do so - we are hence not convinced that they will follow up with another hike in December -though much can change on markets in the reminder- and even if they do, it is more likely to be a 25bp move."
Peter Attard Montalto, Nomura, London
“The minutes confirmed that the focus of the discussions (which led remember to a unanimous hike) were on risk premia, if it was external only or both external and internal, and also on the inflation outlook, if they should look at core remaining under control or if there would be pass through from headline or if they should just be looking at strong headline pressures."
“An overall majority was found for seeing domestic led risk factors as well as general concern over inflation (though disagreement over exactly what to be looking at). The MPC seemed to mark themselves against their previous, inter-meeting, statement on both the inflation and risk fronts. Indeed it is made clear, and agreed by all members of the MPC, at the end of the minutes (similar to the post MPC statement) that "if the outlook for inflation did not improve and risk perceptions did not decline, monetary conditions might be tightened further"."
“We think there is about to be a sharp acceleration in inflation into the new year and that core ex VAT rates will increase also (though more slowly) whilst at the same time the potential for further external risk deterioration after this week's EU summit through till we get ECB QE in H1 next year that there there is still room for additional hikes in December and January taking us up to 7.50%."
“Importantly in this regard the minutes again make clear that whilst the currency moves (and volatility) are important a wider range of risk premia measurements are also important and still look distressed to us. As such both the risk premia and inflation items on the MPC "check list" will remain ticked and hence a view of hikes."
