Odds of a rate cut rise as Hungarian inflation plummets in February

By bne IntelliNews March 8, 2016

The rise in Hungary's consumer price index (CPI) slowed to just 0.3% y/y in February, the statistics office reported on March 8.

The slowdown in consumer price inflation was even sharper than forecast. Expectations were lowered following January's apparent peak at 0.9% and hints from the Magyar Nemzeti Bank late last month that its inflation report – due out later this month – will likely cut the forecast substantially.

With the threat of a return to deflation clearly rising, February's CPI reading will raise the odds that the central bank could soon return to monetary easing by cutting the benchmark interest rate. The central bank has insisted for the last few months that unconventional policy is the best tool, but with the likely added impetus of further easing from the European Central Bank at its March meeting, the lack of inflationary pressures could nudge the MNB towards lowering the 1.35% rate.

As Raiffeisen Bank International point out, the poor February data "may confirm the [MNB's] next steps, as the market expects downward revision in [the] inflation path and further easing steps to curb currency appreciation and to fight deflation".

Unsurprisingly, oil was responsible for most of the damage once again. On an annual basis, motor fuel prices fell 11.2%, while electricity, gas and other fuels reversed 0.1%. Food prices rose by 1.3%, while an average price rise of 2.6% was observed for alcoholic beverages and tobacco, 1.8% for consumer durables, 1.3% for services and 0.1% for clothing and footwear. On a monthly basis, the CPI ticked down by 0.1% – the third such result in a row.

"Inflation is expected to moderate further and may temporarily fall into a negative territory in May," forecasts KBC. "The reacceleration of CPI may come as of August but may remain below 2% y/y even in December. For the whole year, we expect average inflation at 0.5%."

Related Articles

Ukraine's central bank cuts key policy rate to 13%

The National Bank of Ukraine (NBU) will cut its key policy rate by 1 percentage point (pp) to 13% per annum, the regulator said in a statement published on April 13. According to the ... more

Polish core inflation surprises with strong acceleration in March

Polish core inflation gained 0.6% y/y in March, the National Bank of Poland (NBP) announced on April 12. The reading is 0.1pp above market expectations and 0.3pp higher compared to February.   ... ... more

Erdogan pressure drives Turkish banks to cut mortgage rates to below deposit rates

Rising liquidity costs caused by the implicit rate hikes of the Turkish central bank pushed the average cost of 3-month deposits for Turkey's banks to 11.30% while the average mortgage rate declined ... more

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