Hungary: Inflation uptick complicates rate-cut path – ING
ING’s Peter Virovacz expects Hungarian industrial production to rebound in July, helping avoid a third-quarter GDP decline despite August headwinds from heatwave-related energy issues.
Hungarian industrial output is anticipated to grow in July, potentially preventing a GDP decline in the third quarter, despite challenges from a heatwave and increased energy costs. August inflation is expected to climb due to surging fuel prices and a weakening national currency, the Forint. While a 0.2% monthly rise in inflation is forecast, ING maintains its belief in ongoing rate cuts, even as the economic landscape becomes more intricate.
The upcoming industrial production data in July aligns with a recent trend of mixed monthly results. Avoiding a quarterly GDP drop hinges on a robust start to the third quarter, as summer heatwaves will likely lead to a notable slowdown in industrial output in August, owing to reduced production levels. On Tuesday, August's inflation figures will be disclosed, with estimates suggesting fuel price hikes will contribute around 0.10-0.15 percentage points to the monthly inflation rate.
Although this figure, alongside a forecasted 0.2% inflation increase, may not prompt the Monetary Council to halt rate cuts, the combination of higher yields, energy expenses, and a weaker currency creates a more complicated scenario.
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