The key event in Hungary next week is the September National Bank of Hungary (NBH) interest rate setting meeting. We expect the central bank to merge key and effective rates at 13%, ending the first phase of normalization. We do not expect any radical change in future orientation. This means that the tone will remain generally aggressive, leaving all options open; from a pause to a 100bp cut in upcoming meetings as the decision-making process is now agile and data-driven.
We can expect a lot of volatility in the market as the markets may feel some disappointment, but to be fair, this September meeting will not be able to put more tough measures on the table and words alone will not be enough to make the markets rethink their expectations of rate cuts, which the BNB last time considered excessive.
In addition to the monetary policy event, we will look at the latest labor market data, where the overall picture will remain unchanged, showing strong nominal wage growth and a relatively low unemployment rate despite the four-quarter technical recession. The current account will reach a surplus based on preliminary monthly data, showing a marked improvement in external balances.