Today the NBH will hold its rate-setting meeting. We believe that the meeting will not astonish anyone and the MPC will meet expectations and leave rates unchanged. As the latest minutes of the NBH Monetary Council meeting, held in December, showed that the decision to leave rates unchanged was unanimous, we believe that the situation in Hungary has not changed significantly – the forint remains strong and inflation did not rise unexpectedly in December - to justify a change in the Council’s stance.
It is worth mentioning that Friday’s comments from different members of MPC showed that central bankers are split over future prospects of inflation. While Governor Zsigmond Járai warned that the inflation can surge up to double-digit levels, another rate-setter Csaba Csaki said that double-digit inflation is unlikely. Nevertheless we believe that after last week’s figures regarding inflation and wages, which did not show significant evidence of price pressures (inflation rose in line with consensus 0.1 % y/y and real wage growth slowed sharply in November to 3.6 % from 4.3 % in the first 10 month of last year), hawks in MPC should not have enough arguments for the rate hike.