Central Europe's most dovish central bank left its base rate at 0.9% and the overnight deposit rate at -0.05% in October. The NBH also affirmed its accommodative stance, warning of downside price risks due to weakening European activity.
All economists taking part in the Nov. 11-13 survey said the NBH would keep both rates unchanged next week. The central bank has said any necessary changes to its monetary policy framework would depend on the development of the inflation outlook.
The bank targets 3% inflation with a tolerance range of a percentage point on either side. Tax-adjusted core inflation, its preferred measure of lasting price trends, rose to 3.7% in October from 3.4% in September.
"On the whole, the outlook has remained consistent with the (bank's) previous assessment," said Eszter Gargyan, an economist at Citigroup. "However, the downside risk has diminished."
"The likelihood of any further easing has decreased due to the rise in core inflation, which has shifted the picture towards policy remaining unchanged," she said.
The central bank has said it was in a "data-driven mode" and any necessary adjustment of monetary conditions would be implemented through changes in its overnight deposit rate or tools designed to adjust market liquidity. The bank will discuss its fresh inflation report and forecasts next month.
The forint, central Europe's worst performing currency with a 4% loss versus the euro in 2019, reversed its late-October rally this month and is again trading within sight of its September record-lows at 336 per euro.
Commerzbank economist Tatha Ghose has said the latest inflation figures have been a "negative shock" for the forint and the central bank's inflation outlook.
"Inflation remains soft around euro zone and this is helping curtail inflation in CEE countries such as Poland. Hungary, in contrast, is witnessing increasing uncertainty on the inflation outlook," he said in a note.
"Against this background, (the NBH's) ultra-dovish stance, the absence of hawks on the MPC, and the recently expanded QE targets appear to be inconsistent; unconditional rather than data-driven."
In its latest inflation report, the bank forecast headline inflation averaging 3.4% next year and 3.3% in 2021, which David Nemeth, an economist at K&H Bank in Budapest, said was not consistent with the NBH's comments on downside inflation risks.
Economists polled by Reuters forecast average inflation at 3.3% next year and 3.15% in 2021. After this year's 4.7% pace, however, economic growth is seen slowing to just 2.8% by 2021, which may also make the NBH hesitant to tighten anytime soon.
By Gergely Szakacs
