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JP Morgan Say Food Disinflation Could Drive Headline CPI 6ppts Lower by End-2023

HUNGARY
  • JP Morgan say the decline in March inflation was driven mainly by a collapse in food inflation, which they now expect to slide further to the high single digits by end-2023. Given the large weight of food (nearly 20% of the basket), this alone can shave around 6ppts from headline CPI between now and year-end.
  • At first sight, core inflation as measured by the NBH developed positively in April, having fallen by more than expected. Yet, the downside surprise is fully accounted for by the sharp collapse in processed food prices (which the NBH, unlike central banks in the region, includes in core).
  • Instead, core CPI excluding food sees a flat 19.8%oya, which is one decimal above JP Morgan’s expectations. Momentum wise, the data confirm March’s print was a one-off overshoot of the trend. When taking the average of the last three months, JP Morgan find core inflation is still running at an 18% annualised pace, which hardly suggests any structural disinflation from the peak.
  • Following the April NBH rate decision, JP Morgan called for a rate to the O/N deposit rate in June, though saw an almost equally as likely chance of a cut in May (60% vs. 40% probability respectively).
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