MNB expects CPI-inflation to have peaked at 3.4% in July

HUNGARY - In Brief 10 Sep 2018 by Istvan Racz

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Tomorrow at 9am BUD time, the KSH will come forward with its August CPI-inflation data. Analysts expect 3.3% yoy, slightly down from the 3.4% actual measured for July. The MNB previously predicted the same outcome, somewhat ambitiously adding that the yoy headline rate may have actually peaked in July.We are a bit less optimistic than all these forecasts. The wholesale prices of fuel rose by 0.2% mom in August, suggesting that the headline CPI-inflation rate could be indeed 3.3% yoy in the same month if non-fuel inflation turns out at 0% mom, which was the actual figure in August 2017. We think that non-fuel inflation is equally likely to come out at 0.1%, and so the headline rate could be in fact 3.4% yoy, unchanged from a month ago.More importantly, we expect the headline rate to rise again in September, simply because non-fuel inflation is likely to be higher in that month than the -0.1% mom, reported for the same month of 2017. Given the previously announced price hike in the area of tobacco products (related to higher excise taxes), and the significant upward pressure on milk and bakery prices, we expect 0.2-0.3% for non-fuel inflation. And that would imply a headline rate of 3.4-3.6% yoy in September if fuel price remain unchanged in that month.