NBH augurs slowdown in pace of inflation after September

The National Bank of Hungary (NBH) expects CPI to continue to rise for the rest of the year, albeit at a slower pace after September, a central bank director said on Thursday.

Presenting the NBH’s latest quarterly Inflation Report, Andras Balatoni said CPI would continue to climb in the remaining months of 2022, driven mainly by factors outside of the scope of monetary policy. He added that the increase would be „front-loaded”, with most showing up in September CPI, followed by increases „at a slower pace” in the following months.

Mr Balatoni said disinflationary effects would „present more prominently” in the first half of 2023 on the back of a turnaround in global commodities prices against the backdrop of recession risks as well as a decline in domestic demand and household consumption. The disinflationary trend will „accelerate” from the second half of 2023, supported by base effects and the impact of earlier monetary policy decisions, he added. He said CPI would reach the 4.0pc upper threshold of the central bank’s tolerance band in the first half of 2024.

The NBH puts average annual inflation for this year in a range between 15.0pc and 15.5pc in the fresh Inflation Report, published in full on Thursday. Average annual CPI is set to reach 10.6pc-12.9pc in 2023 and fall to 2.6pc-3.5pc in 2024, the report shows. The central bank forecasts GDP growth will reached 3.0pc-4.0pc in 2022, then slow to 0.5pc-1.5pc in 2023 before picking up to 3.5pc-4.5pc in 2024.

It projects a decline in investments and in household consumption expenditures in 2023. Household savings are also expected to fall temporarily. Mr Balatoni said Hungary’s current-account deficit would „rise markedly” in 2022 because of higher energy prices. The NBH forecasts a current-account deficit equivalent to 7.7pc-8.7pc of GDP for 2022 and a gap of 5.8pc-7.0pc for 2023.