Hungarian headline inflation likely to accelerate in 2018

Inflation in Hungary is expected to rise higher from last year. According to an Erste Research Group, Hungarian inflation is likely to accelerate to about 3 percent on average in 2018 from 2017’s 2.4 percent. The 3 percent inflation target is expected to be met in the second quarter of this year, owing to the build-up of inflationary pressure driven by increasing real wages and some non-core items, such as fuel prices.

If the oil price rise carries on in the first quarter of this year, the inflation target might be met slightly earlier than anticipated. Since the Hungarian central bank introduced the +/- 1 ppt tolerance band around the target, the MPC is in no rush to begin the normalization of the interest rate environment, and might remain very dovish throughout this year.

“We do not expect the upper threshold of the tolerance band to be reached in 2018 or 2019”, added Erste Research Group.

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