Economic Analysts’ Perspective on Current Conditions
Inflation in Hungary has Fallen into the National Bank’s Tolerance Band According to Analysts
Inflation in Hungary may have fallen into the National Bank’s tolerance band for the first time in almost three years in January, according to analysts. Ahead of the release of data by the Central Statistical Office on Friday, analysts told World Economy that January is an important month for repricing, and there are increasing signs that price pressures in the Hungarian economy are now lower.
After a rate of 5.5 percent in December, the rate of money depreciation could have been 4.4 percent on an annual basis this time, and 1.1 percent on a monthly basis. Analysts expect inflation figures to fluctuate between 4-5.5 percent from spring onward, with no clear trend.
According to Orsolya Nyeste, a senior analyst at Erste Bank, the base effect always contributes to lower inflation in January, which could bring it back into the National Bank’s target range. With a forecast of 3.7 percent, she is currently the most optimistic among analysts. Gábor Regős, an analyst at Gránit Fund Management, stated that January inflation could have been influenced by several factors during the month, with potential positive or negative surprises in the pace of food price increases.
Dániel Molnár, a senior analyst at the Makronóm Institute, expects the annual rate of inflation to have slowed to 4.4 percent in January, while prices may have risen by 1.2 percent on a monthly basis. However, Molnár pointed out that the main risk to inflation is posed by world oil prices on the one hand and fuel prices on the other.
The big question is how the central bank will react to the better-than-expected inflation data. The Hungarian National Bank (MNB) should have cut the base rate by 100 basis points in December, but it will have the opportunity to do so at its next interest rate decision meeting on February 27. The base rate in Hungary is 10 percent, compared with four percent inflation, meaning the real interest rate is around six percent.
It remains to be seen how the central bank will adjust its monetary policy in response to the latest inflation data.
