Hungary’s inflation slows to 3% in September ’24

Hungary’s consumer price inflation has eased to 3 per cent in September, aligning with the central bank’s target, according to the Budapest-based statistics office.

This marks the lowest inflation rate since January 2021 and is an improvement from August’s 3.4 per cent. However, the reading was slightly below the median estimate of 3.1 per cent in a Bloomberg survey.

Despite the favourable inflation data, policymakers may face challenges in continuing monetary easing due to a weakening forint, increasing geopolitical risks, and expectations of rising prices for the remainder of the year.

The central bank resumed interest-rate cuts last month, contributing to the forint’s drop to an 18-month low against the euro.

Deputy Governor Barnabas Virag indicated that the potential for further rate cuts is limited, particularly in light of upcoming geopolitical events, including the US presidential elections and escalating tensions in the Middle East.

“The scope for decisions has definitely shifted towards pausing the rate cut cycle,” he stated.

Following the inflation report, the dollar declined by 0.4 per cent against the euro, reducing gains made after Virag’s comments earlier in the week that had led to diminished rate-cut expectations among traders.

The central bank has projected a rise in inflation, forecasting consumer prices to increase by 4.2 per cent annually by December while maintaining a target inflation rate of 3 per cent with a one percentage point tolerance band.

Attribution: The Budapest-based statistics office, Bloomberg

Subediting: Y.Yasser