Hungary's inflation, the highest in 25 years, hits the forint



By Pawel Florkiewicz and Anita Komuves

WARSAW/BUDAPEST, Aug 9 (Reuters) - The Hungarian forint slid on Tuesday, underperforming regional peers as data showed inflation soaring further, which could prompt the National Bank of Hungary to raise rates even higher, analysts said.

Core inflation surged to an annual 16.7% in July, its highest in 25 years, while headline inflation also exceeded market expectations as it rose to 13.7% year-on-year in July, data showed on Tuesday.

The Hungarian forint EURHUF= slid 0.38% and was trading at 393.45 per euro.

The NBH hiked its base rate by a hefty 100 basis points to 10.75% on July 26 as it fights soaring inflation.

In order to tackle second-round effects of inflation the central bank will have to continue aggressive tightening, Peter Virovacz, senior analyst at ING wrote in a note.

"In the next months the bank could raise rates by up to 100 basis points each month... in order to reach positive real interest rates as soon as possible," Virovacz wrote.

"(That) could sustainably strengthen the forint. We do not exclude that the central bank will only stop with rates at around 14% (or 15%)."

The central bank said it would continue to hike rates until inflation returns into its target range, Commerzbank wrote in a note.

However, "the market will also keep a close eye on the extent to which the MNB would be prepared to continue with rate hikes despite a significant deterioration of the economic outlook", it added.

The National Bank of Hungary holds its next rate-setting meeting on Aug 30.

Elsewhere, the Polish zloty EURPLN= was stable at 4.7040 versus the common currency.

"The zloty invariably shows an appetite to go below the 4.70 level, but it still lacks arguments for it," Bank Millennium analysts wrote in the daily report.

"We believe that in the following days it may be more and more difficult, as on Friday we will get the local data (CPI, current account) 'reminding' investors about imbalances in the Polish economy," they added.

The Czech crown EURCZK= was stable at 24.503 per euro and the Romanian leu EURRON= was also little changed, trading at 4.9055 per euro.

Budapest's stock index .BUX fell by 1.06%, while Prague equities .PX were 0.27% higher. Warsaw .WIG20 added 0.01% while Bucharest .BETI gained 0.22%.

CEE

SNAPSHOT

AT

MARKETS

1047 CET

CURRENCIES

Latest

Previous Daily Change

bid

close

change in 2022 EURCZK Czech

<EURCZK

24.5030 24.5120 +0.04

+1.51% =

crown

=>

% EURHUF Hungary <EURHUF

394.9500 393.4500 -0.38%

-6.47% =

forint =>

EURPLN Polish <EURPLN

4.7040

4.7050 +0.02

-2.40% =

zloty

=>

% EURRON Romania <EURRON

4.9055

4.9085 +0.06

+0.87% =

n leu

=>

% EURHRK Croatia <EURHRK

7.5080

7.5095 +0.02

+0.13% =

n kuna =>

% EURRSD Serbian <EURRSD

117.2500 117.3900 +0.12

+0.28% =

dinar

=>

%

Note:

calculated from

1800

daily

CET

change

Latest

Previous Daily Change

close

change in 2022 .PX

Prague

.PX

1239.73 1236.410 +0.27

0

% .BUX

Budapes .BUX

43566.17 44034.83 -1.06%

-14.11%

t

.WIG20 Warsaw <.WIG20

1695.97 1695.78 +0.01

-25.19%

>

% .BETI Buchare .BETI

12608.06 12579.95 +0.22

-3.47%

st

% .SBITO Ljublja <.SBITO

1170.32 1162.71 +0.65

-6.78% P

na

P>

% .CRBEX Zagreb <.CRBEX

1968.53 1968.70 -0.01%

-5.33%

>

.BELEX Belgrad <.BELEX

839.26

846.08 -0.81%

+2.25% 15

e

15>

.SOFIX Sofia

<.SOFIX

606.97

607.91 -0.15%

-4.52%

>

Yield

Yield

Spread Daily

(bid)

change

vs

change in

Bund

Czech

spread

Republi

c

CZ2YT=

<CZ2YT=

5.7990 -0.1570 +532b

-20bps RR

2-year RR>

ps CZ5YT=

<CZ5YT=

4.4780

0.0560 +378b

+3bps RR

5-year RR>

ps CZ10YT

<CZ10YT

3.8520

0.0160 +294b

+0bps =RR

10-year =RR>

ps

Poland

PL2YT=

<PL2YT=

6.7700

0.0800 +629b

+4bps RR

2-year RR>

ps PL5YT=

<PL5YT=

6.0560

0.0950 +536b

+7bps RR

5-year RR>

ps PL10YT

<PL10YT

5.5950

0.0870 +468b

+7bps =RR

10-year =RR>

ps

FORWARD

3x6

6x9

9x12

3M interbank

Czech

<CZKFRA

7.34

7.20

6.71

7.30

Rep

><PRIBO

R=>

Hungary <HUFFRA

13.60

13.72 13.60

11.98

><BUBOR

=>

Poland <PLNFRA

7.42

7.28

6.93

7.03

><WIBOR

=>

Note:

are for ask prices

FRA

quotes

**********************************************

****************


Editing by Jan Harvey

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