Hungary: Inflation uptick complicates rate-cut path – ING

ING’s Peter Virovacz expects Hungarian industrial production to rebound in July, helping avoid a third-quarter GDP decline despite August headwinds from heatwave-related energy issues. August inflation is seen rising on higher fuel prices and a weaker Forint, with a 0.2% monthly print lifting headline inflation, though ING still anticipates continued rate cuts despite a more complex backdrop.

Industrial rebound and inflation pickup

"Following a disappointing performance in June, we expect a rebound in industrial production in Monday's release, which is in line with the jigsaw pattern of monthly performance that has recently emerged."

"A good start to the third quarter will be crucial for avoiding a quarterly drop in GDP, as the heatwave and the related energy crisis will definitely bring a significant decrease in industrial production volumes in August due to voluntary production reduction."

"Tuesday brings the release of August inflation."

"We estimate that fuel prices will add roughly 0.10-0.15ppt to the monthly inflation rate in August."

"However, some seasonal factors will counterbalance this, with an expected 0.2% monthly inflation reading pushing up the headline figure after months of disinflation."

"In our view, the 1.4% figure itself won’t make the Monetary Council stop cutting interest rates."

"Still, rising yields, higher energy prices and a weaker HUF make the picture more complex."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)