Economists had expected inflation to rise to 3.8%.

Despite this uptick, core inflation, which excludes volatile items, eased from 4.8% in September to 4.4% in November, while on a monthly basis core inflation was up 0.3%.

Fuel prices rose 2.4% m/m, driven by the stronger dollar, and food prices increased by 0.9% in the same period, primarily due to weaker agricultural yields resulting from the drought.

In annual terms, food and prices rose above the headline figure, although service inflation slowed to 7% last month.

Consumer durable prices inched down 0.2%  due to price reductions, potentially due to "Black Friday" sales, while motor fuel prices rose 0.7% y/y.

While the overall inflation picture is not alarming, analysts said households may experience higher inflation in food and services, which could further erode consumer confidence just as consumption looks set to recover from a slump.

Markonom Institute expects inflation to accelerate to 4.4% in December, exceeding the central bank's 2-4% target range due to a low base effect from last year. The impact of inflation-tracking pricing in the services sector will fade out in early 2025. Headline inflation is set to return to the central bank's target by the summer of 2025.

 

 

The annual average inflation for 2024 is expected to settle around 3.7% and exceed 4% next year.  The forint’s exchange rate, wage increases, and companies’ ability to pass on costs, especially in light of tax hikes planned for next year, will shape the inflationary outlook in 2025, analysts said.

The Hungarian National Bank is expected to maintain caution in its monetary policy stance. Although higher inflationary expectations might justify a more hawkish approach, concerns about speculative attacks on the forint could deter the central bank from signalling potential rate hikes.

Analysts said Hungary's monetary policy landscape remains constrained by a delicate balance between supporting economic stability and managing currency fragility.

The forint also traded in a tight range with the euro after the release of the data. The EUR/HUF eased to 410 from 414 at the end of last week before the last rating review. The decision by Fitch to revise the outlook to stable from negative while affirming Hungary's investment-grade sovereign rating seemed to have soothed market sentiment.