K&H Analyst Commentary: What awaits Hungarian inflation?

Annual inflation was 4.3 percent in September, which is slightly below market expectations. Dávid Németh, chief analyst at K&H, said that the dynamics seen in recent months have largely remained. “It is favorable that food prices are slowing down, and in fact, they have even decreased on a monthly basis. Services are also showing a decreasing trend, but they are still characterized by a relatively high price increase, as they have increased by 5.9 percent on an annual basis. The inflation seen in the sector can be explained, among other things, by the increase in the price of holiday and restaurant services. This is also indicated by the fact that the Central Statistical Office specifically highlighted: annual food inflation excluding catering services was only 3 percent in September, while including them it amounted to 4.7 percent,” the expert said. He said it was positive that the strong forint was making its impact felt, as the price of durable consumer goods increased by only 2.5 percent on an annual basis.

At the same time, the expert also stated that “inflation has not yet been completely curbed, as annual core inflation still shows a 3.9 percent increase in price, which does not represent a change compared to the previous month’s data and is just within the MNB’s tolerance band.” We should not forget about the impact of government margin stops, as without them, inflation figures would most likely be above 5 percent.

Dávid Németh expects that, according to current prospects, annual inflation will be above 4 percent in the next two months, but it could slow down to around 3.7 percent in December. At the beginning of next year, the rate of inflation may decrease to the 3 percent level, and may even temporarily drop below this.