Hungary’s MPC bringing loose policy to an end

The National Bank of Hungary’s revamp of its monetary policy framework announced today was characteristically complex. But the key point is that the Bank is paving the way for policy tightening and we expect interbank interest rates to increase over the course of next year. Given the build-up of inflation pressures in the economy, we anticipate a larger rise in the three-month BUBOR rate than is priced into financial markets.