HUNGARY: ING Revise 2024 and 2025 CPI Forecasts Lower

Although services inflation continues to be a concern, ING note that the recent decline in overall inflation has brightened Hungary’s near-term inflation outlook. Consequently, they have revised their CPI forecasts for 2024 and 2025 downward, albeit with some risks for the coming year. They expect average price increases of 3.8% in 2024 and 4.2% in 2025.

• Looking ahead, ING expect next month's inflation to be broadly similar to today's, with perhaps some moderation. Thereafter, however, the year-on-year rate could rise more sharply due to the low base.
• Given today's services inflation and the August fiscal data, ING believe that the Hungarian economy could perform even more weakly in the second half of this year than previously expected. In the short term, inflationary pressures from the domestic demand side are unlikely to be significant.
• From a monetary policy perspective, the incoming data opens the door for a 25bp rate cut in September. A 50bp cut by the Fed (ING’s low-conviction base case) and a dovish tone from the ECB would reinforce this call.