Hungary to stick to slower rate hikes after May CPI data – c.banker

FILE PHOTO: The National Bank of Hungary building is seen in Budapest, January 18, 2012. REUTERS/Bernadett Szabo

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  • CPI data may beat market forecasts
  • Core CPI and Underlying Price Indicators Jump
  • The bank should avoid tightening in too large increments
  • Repricing, wages, food prices to determine rate trajectory

BUDAPEST, June 8 (Reuters) – Hungary’s central bank will stick to a slower pace of rate hikes enacted last month, even after May inflation data beat market expectations, it said. rate chief Bianka Parragh said Wednesday.

The National Bank of Hungary (NBH) said last month it would continue to tighten monetary policy “for the foreseeable future” after raising its main interest rate by just 50 basis points, half the pace of rate hikes in recent months.

Headline inflation hit 10.7% year-on-year in May, beating analysts’ forecasts, while core inflation jumped nearly 2 percentage points from April, prompting some economists to raise their forecast for 2022.

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“The data was not a surprise for the central bank, we were expecting a double-digit reading,” Parragh told an online forum, adding that the BNH would continue with rate hikes in the second half of 2022 to curb the growth. price growth.

“As for the period ahead, the tightening will continue, however, we must not take too big steps. Nevertheless, determined steps are needed in monetary policy.”

She said underlying inflation trends would be key in determining the extent of the tightening after the bank’s closely watched indicator of enduring price trends jumped and inflation expectations remained well. above the bank’s target range.

Parragh said the bank would closely monitor monthly price revision activity across the economy, which has so far shown much more frequent price revision by companies than the average seen over the past few years. last five years.

“If these price revision measures were to moderate, that would be a hopeful sign, that would certainly be a good positive sign,” she said.

Parragh added, however, that double-digit wage increases amid what she called an “extremely tight” labor market were making it difficult to lower inflation, adding that the prices of wheat, corn, sugar beet or coffee would also be an important factor in political decisions.

“These are the three pillars that will be decisive for inflation, determining the course and magnitude of rate hikes,” she said.

Economists polled by Reuters expect Hungary’s base rate to rise to 8% by the end of the year, from 5.9% currently.

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Reporting by Gergely Szakacs; Editing by Toby Chopra and Alex Richardson

Our standards: The Thomson Reuters Trust Principles.

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