Consumer prices rose 3% year on year (chart) in September, the lowest figure since January 2021, driven by the decline of fuel prices, according to monthly data by statistics office KSH. The figures were slightly lower than the consensus.

Compared to the previous month, prices edged 0.1% lower.

Core inflation, which excludes volatile fuel and food prices, rose from 4.6% in August to 4.8% due to base effects. According to the financial portal Portfolio.hu, the quarterly annualised core inflation suggests the moderation of inflationary pressures, as the index dropped from 5.7% in August to 4.8%.

Food prices rose 3.7% in annual terms, the highest since the end of 2023, and were up 1.0% m/m, attributed to the phase-out of mandatory discounts and the summer drought.

Household energy prices contracted 5.0% y/y, but edged up 0.2% compared to August.

Consumer durables also dragged down the headline figure by 0.2% annually. One of the biggest factors in the September inflation data was the decline in fuel prices, down 3.7% on a monthly basis and by 9.5% y/y.

As in previous reports, services prices remained elevated, rising 8.4% y/y, but down 0.8% from the previous month.

The National Bank’s measure of sticky price inflation moved lower by 0.4pp to 5.4% y/y, the lowest reading since September 2021.

The government will maintain targeted and effective measures to keep inflation in check. According to a statement of the National Economy Ministry, persistently low inflation translates into predictability and strengthens consumer confidence, boosting consumption and supporting economic growth.

 

 

Headline inflation has probably reached its bottom for the year and is set to accelerate to 4.0-5.0% in the coming months, due to base effects and tax measures. Continued dynamic wage growth and the pick-up of demand could also fuel inflation, according to analysts. Core inflation is set to climb to 5% at the end of 2024.

Economists expect disinflation to resume next year and the headline data could return to the central bank's target range of 3% sustained basis only in H2 2025.

The fresh data is supportive of further monetary easing, but policymakers will watch other factors attentively at the October 22 meeting. The forint’s exchange rate will be one of the key factors to watch, after the Hungarian currency weakened to an 18-month low against the euro, trading over 401.

The forint weakened more than its peers after geopolitical tensions heightened in the Middle East.

MBH Bank expects the central bank to make at least a 25bp cut in the remaining three rate-setting meetings, bringing the base rate to 6.25% at the end of the year. This aligns with analysts’ consensus.