MNI NBH Preview - Apr'25: Caution Still Warranted

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Executive summary:

• The National Bank of Hungary is expected to keep its base rate on hold at 6.50% again this month, despite the slowdown in headline inflation in March.
• Comments from both Governor Mihaly Varga and Deputy Governor Zoltan Kurali indicate that it is highly unlikely that any changes will be made to the Bank’s hawkish guidance, with officials committed to achieving and maintaining price stability amid an uncertain geopolitical backdrop.
• Among sell-side, no analyst we have surveyed expect to see any change to rates this month, with many still expecting the base rate to remain on hold through the remainder of the year. 

In the months ahead, profit-margin caps imposed on certain food products are likely to contribute more substantially to disinflation, while weaker commodity prices will also weigh on price growth. However, despite the more favourable inflation print in March, Governor Mihaly Varga recently reiterated that Hungary’s central bank is committed to achieving and maintaining price stability, indicating that there will be no change to hawkish guidance in the April policy statement. He said global recession and inflationary risks are rising due to: (1) the Russia-Ukraine war, (2) tariff tensions and, (3) weakness of German economy.