Inflation is now falling, but another increase is expected by the end of the year
Hungarian inflation eased in August, but it is expected to rise again by the end of the year, according to the analyzes of experts interviewed by Portfolio. Based on the opinion of economists, the consumer price index may have decreased to 3.7% in August from the previous month’s value of 4.1%. This decrease is mainly attributable to base effects, however, experts unanimously believe that inflation may rise gradually and even exceed 5% by the end of the year.
Analysts emphasized that several factors were behind the decline in inflation, including the moderation of fuel prices and the run-out of food price increases caused by the end of mandatory promotions. According to Péter Virovácz, ING Bank’s chief economist, these effects had already worn off by August, which had a moderating effect on inflation.
At the same time, Zsolt Becsey, an analyst at Unicredit Bank, warned that the increase in food prices due to crop losses caused by the drought may reappear in autumn, which could result in new inflationary pressure. Gábor Regős, the economist of Gránit Fund Management, drew attention to the fact that the introduction of mandatory promotions and the reduction of fuel prices had only a temporary effect on reducing inflation.
The prices of services have exerted significant pressure on inflation in recent months, which, according to Zsolt Becsey, is mainly due to the “sticky” prices, which slow down the disinflation process. Although weak consumer demand may sooner or later moderate the price increase of services, this effect is not sufficient for the time being. Gábor Regős pointed out that, based on the second-quarter GDP data, the increase in demand for services contributed significantly to the expansion of consumption, which could exert further inflationary pressure.
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