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2021/06/10 / Erste Group Research

Monetary policy to become tighter amid economic rebound

Annual GDP growth could reach as high as 7% this year and is set to slow to around 4% in 2022. Industrial exports will remain an important growth driver, while domestic consumption should also improve, as the economy gradually reopens. The expansive fiscal policy, coupled with the EU Recovery Funds, implies an investment-based recovery in the medium term. Meanwhile, inflation is on an upswing and the annual average inflation rate will exceed 4% this year. Apart from many one-off price-increasing effects characterizing the year, the danger that permanent second-round inflation effects will also intensify has increased.

The fast economic rebound, coupled with rising inflation, has made the central bank change its loose monetary policy stance. Monetary policy decision makers promised to embark on a monetary tightening cycle, with the first effective step to be carried out at the June rate setting meeting. Meanwhile, the bond buying program of the MNB should continue for the time being and the phasing-out of the QE will be gradual. As a result of the promised monetary tightening, the forint strengthened below 350 against the euro within a relatively short period of time. We expect the EURHUF to stabilize within a lower range in the coming period.

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General information

AuthorErste Group Research
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusHungary
Currency in focusHungarian Forint
Sector in focus-


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