Hungary slumps back into deflation

Hungary slumps back into deflation
By bne IntelliNews April 8, 2016

Hungary slumped back into deflation in March as consumer prices dropped 0.2%, statistics office KSH reported on April 8.

While a return to deflation has been looking likely in recent months, the drop into negative territory this early in the year came as something of a surprise. The Magyar Nemzeti Bank (MNB) delivered a surprise rate cut to benchmark interest rates on March 22, and said it would likely offer further easing this month. The return to deflation is likely to push rate setters into more extreme action than many have been anticipating.

Unsurprisingly, oil was responsible for most of the damage in March. Although motor fuel prices rose 1.2% m/m, on an annual basis they fell 14.8%. Food prices rose by 0.7% y/y, but pork prices were cut by 19.3%, reflecting the reduction of VAT on the meat at the start of the year. The price of alcoholic beverages and tobacco rose by 2.4% y/y. On a monthly basis, consumer prices rose 0.1%.

Analysts forecast that without a sudden increase of oil prices, inflation is likely to remain in negative territory through the summer. Average inflation is seen likely to come in around 0.2-0.5% in 2016, by both the market and the MNB. In its latest inflation report, the central bank dropped its prediction for 2016 to 0.3% from the previous outlook of 1.7%.

Analysts suggests that the return to deflation confirms the central bank's view about the necessity of the rate cuts, and will push MNB to further monetary easing. The likes of KBC and Capital Economics now say they expect the benchmark to drop as low as 0.75% by the middle of the summer.

 

Data

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss