September inflation down as expected, MNB cools early rate cut expectations

HUNGARY - In Brief 10 Oct 2024 by Istvan Racz

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In September, headline CPI-inflation has been reported as -0.1% mom, 3% yoy, core inflation as 0% mom, 4.8% yoy this morning. The yoy headline rate came from 3.4%, whereas core inflation rose from 4.6%, both actual data from August. As a result, the chart with the headline rate, the core rate and non-fuel inflation is starting to look like the broken end of a string, as headline and core are moving divergently: This means that the Portfolio.hu's analyst poll median was bang on, and the MNB was also close with 3.1% yoy expectation (please, see our related note of yesterday). Maybe one positive deviation was that yoy core inflation did not go up quite as steeply, to 5%, as the MNB predicted. The latter also means that non-fuel inflation was only 0.1% mom, and so the yoy rate of non-fuel inflation fell by one decimal point, to 4.1% in September. A related important story is that Mr. Virág of the MNB spoke publicly twice in the last 24 hours, to Bloomberg yesterday and Reuters this morning. He clearly said that there may not be another base rate cut coming in October, because geopolitical risk and commodity prices have got higher, US rate expectation shifted higher as well, and investors' risk appetite towards emerging markets has fallen most lately. This is fully in line with what we have been expecting for a while. Mr. Virág could have also said they want to see the forint below EURHUF 400, because indeed that is the way the MNB seems to look at things currently. This is almost self-explanatory: EURHUF 400 is much more than just technical or symbolic, it has a lot to do with market psychology and domestic inflation perceptions. We continue to expect no rate cut in Octobe...