Hungarian headline inflation accelerates in April, likely to reach 3 pct by end-2018

The Hungarian headline inflation accelerated in the month of April. On a year-on-year basis, the consumer price index rose to 2.3 percent, consistent with expectations. The rise in fuel price, depreciation of the Hungarian forint against the USD and rises in food price and market services price mainly drove the headline inflation up. Meanwhile, the imported inflation continues to be low, which is best reflected in the tradable goods price. The core inflation rate eased a bit to 2.4 percent year-on-year from 2.5 percent.

According to a KBC Market Research report, the consumer price index is expected to accelerate further in quarters ahead.

“We see the headline inflation around 2.5 percent y/y in June and around 3 percent y/y at the end of the year, which the middle of inflation target band of NBH”, stated KBC Market Research.

As the inflation is rising gradually, no change is expected from NBH’s monetary policy until the external environment does not change, namely until the imported inflation continues to be low. Even if it is significant to monitor how rapidly the domestic components translate into the inflation as it might show the overheating of the economy.

“We believe it won’t be the case in this year, so we maintain our view that the NBH may only gradually moderate the stock of the foreign currency swaps, and the MIRS may be maintained till the end of the year”, added KBC Market Research.

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