JPM Sees Risks Still Skewed for NBH to Continue 75bps Cuts

JP Morgan write on Hungarian inflation that food is still major contributor to disinflation.

• On core inflation, the NBH’s main measure of Core CPI (inflation ex. unprocessed food, alcohol, tobacco, energy, regulated items and adjusted for tax changes) was up 0.3%m/m, leading to a decline in the annual rate to 9.1%oya, just marginally above their 9% forecast.
• Disinflation is over-reliant on core goods, which keep coming weaker and weaker. JPM have been skeptical about Hungarian core inflation momentum falling much more from here, the data for now supports that view, suggesting we are somewhere near a landing zone for inflation.
• They expect that the NBH will cut the base rate another 75bps to 10.75%. After that, they see another 75bp move in January to be followed by a slower pace from February of 50bps per month.
• Risks for now are skewed for the NBH to continue in 75bp steps for a while longer, especially if the Forint is well behaved. They see core inflation stuck at around 4.5% in 2024 and based on that we see the NBH cutting rates all the way to 6.25% at the end of 2024.