Direction shifting towards tightening in Hungary

Hungary’s central bank (MNB) left its key interest rates on hold today but the tone of the communications could not have been much more hawkish without raising interest rates. The MNB is defending its view that inflation will settle back to the 3% target next year, but we think the risks are now increasingly skewed to higher inflation, higher short-term rates and a weaker forint over the course of the year.