With the restrictions in place, families and Hungarian businesses would be negatively affected.Continue reading
Inflation may have fallen into the National Bank’s tolerance band for the first time in almost three years in January, analysts told Világgazdaság ahead of the release of data by the Central Statistical Office on Friday.
Despite January being a particularly important month because of the usual repricing, there are increasing signs that price pressures in the Hungarian economy are now lower, and that this should sooner or later be reflected in the central bank’s decisions.
After a rate of 5.5 percent in December, the rate of money depreciation could have been 4.4 percent on an annual basis this time, and 1.1 percent on a monthly basis.
According to Orsolya Nyeste, senior analyst at Erste Bank, the base effect always contributes to lower inflation in January, which could bring it back into the National Bank’s target range. With a forecast of 3.7 percent, she is currently the most optimistic among analysts. The last time domestic inflation was in the tolerance band (below four percent) was in 2021. That is a big deal even if it is likely to be temporary.
The expert expects inflation figures to fluctuate between 4-5.5 percent from spring onward, with no clear trend.
Gábor Regős, analyst at Gránit Fund Management, said that January inflation could have been influenced by several factors during the month. The two-step fuel price hike in January will not yet be reflected in the data release, or only to a small extent, as these figures will have more of an impact on the February data. At the same time, some services (like road tolls) have already seen an increase in January, while the telecommunication sector will see a delay.
Mr. Regős said that the pace of food price increases could bring either positive or negative surprises.
He added that the retail extra profit tax, for example, could push up prices, as could the rise in wages, although he said there was still no sign of a price-wage spiral, so the overall impact could be moderate.
According to Dániel Molnár, senior analyst at the Makronóm Institute, the annual rate of inflation may have slowed to 4.4 percent in January, while prices may have risen by 1.2 percent on a monthly basis. He pointed out that the data for January and the first months of the year are extremely important for inflation, given that a significant proportion of companies only change their prices at the beginning of the year. He expects the economy to re-price substantially less this year than last, as demand has moderated and price pressures on the production side have disappeared. The month-on-month core inflation indicator, adjusted for one-off effects, also supports the expert’s assessment, at 0.3 percent since the summer.
Mr. Molnár also pointed out that the main risk to inflation is posed by world oil prices on the one hand and fuel prices on the other.
Zsolt Becsey, senior analyst at UniCredit Bank, also stated that companies repriced in January in line with recent years. In the food sector, the upside surprise could be in the fruit and vegetable segment, but he does not expect any blatant data for the product group as a whole.
The big question is how the central bank, which was also very cautious at its last interest rate decision meeting, will react to the better-than-expected inflation data. In neighboring countries, such as Czechia, Poland, and Romania, the base rate is two to three percent above inflation. In Hungary, on the other hand, the base rate is 10 percent, compared with four percent inflation, which is already lower than in those countries, so the real interest rate is around six percent.
The Hungarian National Bank (MNB) should have cut the base rate by 100 basis points in December, but it will have the opportunity to do so at its next interest rate decision meeting on February 27.
Via Világgazdaság; Featured Image: Pixabay