HUNGARY: Headline CPI Expected to Fall to +3.6% Y/Y on Base Effects

Favourable base effects, particularly in fuel and food prices, are expected to lead to a notable decline in year-on-year inflation, from +4.1% in July to +3.6% in August. The NBH noted in its previous policy statement that “disinflation of market services continues to be slow”, while household inflation expectations remain at “high levels”. Data is released at 07:30BST/08:30CET.

• Goldman Sachs expect headline CPI to fall to +3.6% y/y. They expect the decline to be driven by base effects in fuel inflation – petrol prices rose by 8.2% m/m (non-annualised) in August 2023. Beyond this, they also expect base effects in food inflation and a sequential decline in fuel prices to drive the print lower, somewhat offset by base effects in energy inflation.
• ING see a retreat in monthly repricing in August after a significant increase in the previous month, mainly due to non-core factors and policy measures. Fuel prices fell, and ING expect food inflation to moderate on a monthly basis. Against this backdrop, while headline inflation will drop to 3.6% y/y, ING see core inflation rising slightly, reaching 4.8% on a yearly basis in August.
• UniCredit note that base effects likely helped headline CPI to drop to 3.4%, while core inflation could remain outside of the NBH’s target range (2-4%), at 4.7% y/y. Base effects are likely to mostly come from non-core elements, such as fuel or food. They do not expect a summer drought to have had an impact on food prices just yet, but this could continue to pose an upside risk for the remainder of the year and for 2025.