Near 2ppt Drop in Headline Inflation Expected

Inflation data is on the docket later this morning at 0730GMT/0830CET. As per the median estimate of the Bloomberg survey of analysts, monthly CPI is expected to have moderated from +0.4% in September to +0.3% in October, bringing the headline rate down from +12.2% y/y to +10.4%.

• Goldman Sachs expect headline CPI to fall to +10.3% y/y, largely on base effects in food inflation but also reflecting a slowdown in underlying inflation dynamics. Looking ahead, they expect the disinflation process to continue through the remainder of the year, with headline falling well below +7.0% y/y in December, broadly in line with the NBH’s September forecast. On the assumption that the HUF remains relatively stable, Goldman Sachs expect the ongoing disinflation process to enable the NBH to continue cutting at the MPC meeting on Nov 21, and continue to forecast that the base rate will reach 11.0% by year-end.
• ING expect disinflation to continue in October due to base effects and the limited pricing power of companies on demand constraints. Moreover, an October correction in fuel prices will help a lot, they say, resulting in a monthly headline inflation rate of +0.2%, lowering the year-on-year print close to single digits.
• UniCredit expect consumer prices to have increased by only +0.1% m/m in October, bringing annual inflation to +10.1%. Moreover, they think it is safe to say that Hungary is not currently experiencing any unwanted price development and is on track to bring inflation to +7.3% y/y by the end of the year. At the next two NBH meetings, they expect to see 50bp cuts each time, bringing the terminal rate for this year to 11.25%.