Hungary Economics and Macro Strategy: NBH Preview: Eyeing a Safer Easing Path

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Hungary Economics and Macro Strategy: NBH Preview: Eyeing a Safer Easing Path

H: CPI forecast purely reflecting unfavourable base effects from last year’s profit margin cap introduction.

Outcome MS Forecast Despite the fuel price cap imposed in March, fuels inflation rose to 0.1%Y from -3%Y, due

Source: NBH forecasts, Morgan Stanley Research forecasts

to the lagged accounting of pre-cap fuel price increases. Moreover, regulated prices

contributed to the downside, easing to 2.5%Y from 4.8%Y in March, driven by the

Exhibit 5: The FX appreciation is

continued fall in gas prices. Market services and core goods inflation fell to 4.6%Y from

weighing on imported inflation

4.9%Y and to 1.4%Y from 1.6%, respectively. The NBH-preferred measure of underlying

28 %Y, p.p.

23 inflation – core inflation excluding indirect taxes, energy and processed food – rose to

18 2.2%Y from 1.9%Y due to unfavourable base effects in unprocessed food. The measure

13 that also excludes processed food eased to 3%Y from 3.3%Y in March, matching our

3 forecast.

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'21 '22 '23 '24 '25 '26 Inflation to rise ahead but likely less than the NBH currently forecasts: We expect

Mostly Domestic Inflation Mostly Imported Inflation Energy Headline

inflation to accelerate to around 3.5%Y over the summer months and to remain elevated

Source: Haver Analytics, Morgan Stanley Research but below the 4%Y upper limit of the NBH tolerance band until 2Q27, when we see it

easing to or marginally below the 3%Y target. While we also expect core inflation to

Exhibit 6: Regular earnings growth

accelerate in the coming quarters, we see it remaining close to 4%Y in 2027, supported by

remains below the 11%Y minimum wage

improving economic growth dynamics and robust wage growth. Our forecast stands

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