The forint rebounded from a two-week low after inflation rose more than forecast in November and the government signaled a larger-than-expected international aid package.
The currency appreciated 0.9 percent to 303.8 per euro. The BUX index of shares dropped 1.2 percent to 16,924.89 by the close in Budapest. The government’s 3-year bonds fell, lifting the yield 9 basis points to 8.41 percent, the highest since Dec. 1, according to generic prices compiled by Bloomberg. Consumer prices advanced 4.3 percent from a year earlier, the most since April, after a 3.9 percent rise in October.
The central bank raised the benchmark interest rate in November after the forint sank to a record low against the euro, also spurring the government to reverse its policy of shunning aid from the International Monetary Fund. Policy makers will raise borrowing costs again next week as inflation accelerates, according to a Bloomberg survey of economists.
“We expect a 50 basis point hike in December followed by another 25 basis point step in January,” Eszter Gargyan, a Budapest-based economist at Citigroup Inc., wrote in a research report after data showed a rise in inflation.
The median estimate of 17 analysts surveyed was for an inflation rate of 4.2 percent. The Budapest-based Magyar Nemzeti Bank will raise rates by 50 basis points to 7 percent on Dec. 20, according to seven of 10 economists in a separate Bloomberg survey, with one expecting a 25 basis pointS increase and two projecting no change.
Hungary may obtain a financial assistance package of as much as 20 billion euros ($26.4 billion) from the IMF and the European Union, Mihaly Varga, Prime Minister Viktor Orban’s chief of staff, told Origo news website in an interview published today.
“The Monetary Council may halt with rate hikes in February” after the government concludes the deal with the IMF and the EU,’’ Citigroup’s Gargyan said.
The forint pared gains after Fitch Ratings revised down its credit outlooks for Bulgaria, Latvia, Lithuania and the Czech Republic to stable from positive as Europe’s economic-growth prospects deteriorate amid a sovereign debt crisis.