Expect a temporarily low headline inflation figure tomorrow

HUNGARY - In Brief 09 Oct 2024 by Istvan Racz

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The September CPI-inflation data is due from KSH early morning tomorrow. There seems to be broad consensus that a significantly lower number is likely to show up for the headline rate compared to all recent data, indeed the lowest seen at any time since February 2021. There is also broad consensus that this will be temporary, so that the headline rate will climb back to a significantly higher level by the end of this year. Regarding forecast details, here is once again Mr. Virág's latest table (from September 24) with the MNB's monthly predictions: So, the Bank expects the headline rate to drop to 3.1% yoy, whereas core inflation would climb further to 5% yoy in September. Why would core inflation go up so sharply? This is simply a base effect, as the monthly rate of core inflation was an exceptionally low -0.2% in Sep 2023, the only negative monthly figure since Dec 2020. And why would the headline rate go so markedly in the opposite direction? That is mainly because of decreasing fuel prices. We happen to have the same 3.1% yoy headline rate figure in our own forecast table, but that would go with -3% mom, -8.8% yoy for fuels, and +0.3% mom, 4.3% yoy for non-fuel prices. The big difference between the headline rate and the core rate should progressively decrease, pretty much explained by the same factor, in the rest of 2024: fuel prices will have to go up again, because of the recent rise by oil prices internationally and the parallel appreciation of USD against HUF. For December, we see 4.1% yoy headline inflation (just revised our inflation forecast downwards), with the same 4.3% yoy non-fuel inflation as in September but a much stronger +3.5% yoy for fuel prices. ...