Key events in EMEA next week

We forecast that the registered unemployment rate moderated to 5.0% in June down from 5.2% in May. According to the Ministry of Family and Social Policy, initial estimates for the unemployment rate fell to 5.1% last month, but the estimated decline in the number of unemployed people was broadly in line with our forecast, so we stick to our initial projection. It all comes down to the change in the number of people active in the labour market (denominator of the unemployment rate).

We expect the National Bank of Hungary to remain committed to its decisive tightening cycle and we see both the base rate and the one-week deposit rate rising by 125bp to 11.00%. The forward guidance will remain hawkish, suggesting further rate hikes as we are still waiting for inflation to peak in Hungary. Whether this will be enough to give support to the forint remains to be seen. Market expectations regarding tightening are extremely elevated but we see the bar for the market to be disappointed as low. When it comes to data releases, we will get the latest labour market data, which will flag further price pressure in the pipeline with remarkably high wage growth and a near-record low unemployment rate.