Key events in EMEA next week

The main event of the next week in Hungary is the rate setting meeting. The situation remains delicate and though the direction is crystal clear (tightening it is), we are not sure what we can exactly expect from the National Bank of Hungary. Our base case counts with the usual combination of rate hikes: 50bp raise in the base rate followed by a 30bp hike in the 1-week deposit rate on Thursday. However, should the EUR/HUF reach 400 again and stick to this stubbornly as we are approaching the day of the meeting, we would add a higher probability to a more aggressive rate hikes, especially taking into consideration the market pricing regarding the rates in the short run. Alongside with the decision, we will get the latest staff projections as well, where we see an unchanged GDP outlook, but an upwardly revised inflation path both for 2022 and 2023. This should nudge decisionmakers into further commitment of tightening in the second half of the year. We see an above 9% terminal rate in Hungary by the year-end.