Turkey: Growing concerns to force a rate hike
There are growing concerns about the change in the direction of headline inflation. In our view, ongoing deterioration in inflation expectations and weakening real sector balance sheets with the Lira's depreciation given the high levels of FX debt in the private sector is likely to force the central bank to deliver a defensive hike in April.
We expect a 50bp hike with the framework simplification also on the agenda.
Hungary: No change to the monetary policy mix but watch EUR/HUF
In Hungary, the main event for next week is the monetary policy meeting. However, as in the case of the European central bank, Hungarian MPC members would prefer to skip this if they could. Inflation and economic activity data are in line with the National Bank of Hungary's (NBH) forecasts, giving no reason to change the monetary policy mix.
The only thing to watch is EUR/HUF around 310, but as the strengthening has been slow and gradual, we don't expect the central bank to react just yet.