Key events in EMEA next week

The key event in Hungary next week is the April inflation reading, and we expect the low base and partial reopening to impact inflation big time.

While we expect “only” 0.5% month-on-month headline CPI, the year-on-year reading could end up close to 4.9%. The Statistical Office’s out-of-the-blue announcement that it will reweigh core inflation from April (leaving out alcoholic beverages and tobacco from the core basket) will dampen the official core reading to probably below 3% YoY data.

Other than that, the April budget numbers will come out. We expect it to show some moderation impacting economic activity and thus the revenue side of the budget.

Fuel prices continued to grow in April, by more than 3% compared to March. Though weaker MoM dynamics compared to March, in annual terms, the low base effect will push fuel prices to grow by almost 20%, and the contribution of fuel prices to YoY headline inflation will increase from zero in March to 0.6 percentage points in April.

As such, we expect headline CPI to accelerate to 2.8% in April after 2.3% in March but mostly on the back of the base effect related to fuel prices.

Romania's central bank will resume its regular policy meetings on 12 May.

We expect the next meeting to be a rather uneventful one, as the Bank should maintain the key rate at 1.25% and the reserve requirement levels unchanged. More closely watched will be any reference to inflation developments starting to raise eyebrows everywhere, and Romania is no exception.

While we do not believe that any future policy changes will be signalled at this meeting, we can assume that the wording will not be as complacent as before.