We are almost certain to see 10 percent inflation in Hungary this year, and we can be happy to get away with that much.
Inflation may rise further
After 8.3% in February, inflation in Hungary rose further in March, analysts polled by Portfolio predicted interest on Friday morning. However, due to the increase, the variance is really large, with a median of 8.65% and a forecast of 8.4 percent and 9.1 percent, respectively.
This already indicates the uncertainty, at the end of March Barnabás Virág, the Deputy Governor of the MNB, spoke at a regular background discussion that last month’s figure could be 8.5-9 percent.
This is a nearly fifteen-year high, most recently in the summer of 2007 when the rate of price increase appeared better, but then stopped at 9 percent.
With the Russian-Ukrainian war, upside inflation risks have increased, especially in the case of food, where prices will be increasingly affected by the looming shortage of Ukrainian food exports in addition to cost shocks (energy prices), Ágnes Halász believes. According to an analyst at Unicredit Bank, there is no sign of easing on the front of energy prices, which are largely responsible for the current price explosion.
In the case of Hungary, in addition to external cost shocks, wage outflows driven by a tight labor market, an increase in the minimum wage and social transfers to the fiscal balance pose additional inflation risks.
The fuel and partial food price freeze is now somewhat dampening the inflation trajectory, but later, when price restrictions are lifted, it may temporarily generate another wave of inflation.
Fisher pointed out.
The war raised the prices of many energy sources, electricity, raw materials and agricultural products sharply, although after the peaks after the first shock they were substantially corrected downwards, but still stabilize well above the pre-war, already remarkably high levels – Gergely Suppan answers our question. Senior Analyst at Magyar Bankholding. He also says there are a lot of open questions, as it is not known how long the war will last or when it will be possible to lift the sanctions at the earliest. all issues related to Russian gas supplies continue to float, so it is not known how real the risk of gas supply disruptions would be, with unpredictable consequences.
Despite the freezing of certain food prices in February, food inflation has been very strong and I believe this trend will continue in March. Competition The drastic weakening of the forint at the end of February and the beginning of March is expected to lead to significant price increases not only for food, but also for durable consumer goods, for example – Péter Virovácz outlined the reasons for March.
At the same time, the already 9 percent inflation appeared in March, so that the probability that we will see double-digit inflation in Hungary sometime during 2022 will indeed increase, an analyst at ING Bank added. Much will depend on how economic policy decides on the price triangle of overhead cuts – basic foodstuffs – fuels.
Releasing them in one step could bring about a drastic jump in inflation, so now the most likely scenario is that these products and services could return to market pricing with a gradual, gradual change.
Virovácz thinks.
The data of March will have a small effect on the effects of the Russo-Ukrainian war, but this will perhaps increase the data of the next few months to a greater extent, Gábor Regős, an economist at the End of the Century, added.
It’s not over yet, the twenty-year high is coming
In other words, there is a good chance that we will not see the peak of inflation yet, with the exception of analysts, that prices will rise above 10 percent. And that’s it
it would be a peak of more than twenty years, as the value has not been above 9 per cent since the summer of 2001.
Unfortunately, March has not yet brought the inflation peak, the direct and indirect effects of the war will increase the impact of negative inflation. Together with the removal of the fuel price cap, these effects could push the year-on-year price index well above 10% and close to 11% from May, says Mariann Trippon. According to the expert of CIB Bank, the peak may be followed by a prolonged plateau, inflation will remain extremely high for months and the rate of money deterioration may be around 9.6% on an annual average. In 2023, this may decrease to 4%, but the achievement of the inflation target in a sustainable way can be forecast for 2024 at the earliest.
The peak forecast was still given by Zoltán Török, according to an analyst at Raffeisen Bank, inflation may peak at 12.7% in July-August, which has not been seen since August 1998.
In the second half of the year and next year, the slowdown in consumer demand may curb demand-type inflation, but the expected removal of price stops and the possible increase in external supply-side price shocks will further increase inflation and double-digit local peaks in the middle of the year. Analyst at Erste Bank.
What can the MNB do?
Continuing inflationary pressures on the central bank may also be present, which in the current situation means that the Monetary Council was launched in March: the interest rate path may peak higher and longer than previously expected. Of course, if inflation were to “run away”, the MNB could switch to a higher rate of interest rate hike, but it does not have many assets.
In order to curb inflation, a stronger forint exchange rate than at present is needed, as well as anchoring inflation expectations. According to Gábor Regős, the expected rate of interest rate increase in the next period will be maintained in addition to the incoming inflation data.
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