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Deflation in Hungary To Continue To Deepen In January 2015

Tamás Székely 2014.12.29.

Deflation in Hungary will continue to deepen in January next year and the central bank is likely to start cutting the base rate again from March, if the forint bounces back by then, London-based analysts said in their year-end forecast.

“The Hungarian central bank’s dramatic reduction in inflation forecasts is preparing the ground for more rate cuts. Forint weakness is a welcomed development for Hungary as it helps economic growth.” Dmitri Barinov (Union Privatfonds) – bloomberg.com

There are downward risks to the inflation forecast issued by the National Bank of Hungary (NBH), analysts at JP Morgan said in a report. They projected an average inflation rate of 0.5% for the whole of 2015 and a slow increase from there in 2016. Consumer prices are expected to be down an annual 0.8% in January 2015. In this climate the NBH could cut the base rate by 50 basis points in the first half of 2015, the report said.

Goldman Sachs analysts said the NBH held out with a rate cut in December only because it must have concern for the forint’s exchange rate due to its effect on central budget numbers until the end of the year. Goldman Sachs analysts also expect the central bank to cut the base rate from the current 2.1% by 50 basis points in 2015. Analysts at Barclays expect a 60-basis-point cut in 2015. “We maintain our forecast for rate cuts to begin in March and to reach a cumulative 60 basis points,” Barclays’ Hewitt said in the Dec. 19 note.

via bloomberg.com and hungarymatters.hu photo: Hungary Today