WOOD Flash - Hungary macro: MNB leaping towards positive real rates
The MPC at the MNB convened a non-policy meeting yesterday (12 July) to raise and align the base rate with the 1W deposit rate, which stood at 9.75%. The tone from the meeting was visibly hawkish and suggests to us that the MPC has the will and the means to deliver significant tightening from this point onwards. We believe the bank would aim for a positive real rate by as soon as the end of this year, with the 1W deposit rate rising to 16.0% by end-2022E. This reinforces our view that a HUF above 400/EUR remains in oversold territory, while keeping in mind that there are potential risks arising from the magnitude of global tightening, the protracted deadlock over the approval of the recovery fund, and geopolitics. We also see the bank embarking on a brisk easing cycle as early as 1Q23E, with the policy rate dropping to 8.00% by end-2023E and an additional 2ppt of downside.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
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