A lot to digest for today: October CPI, fiscal loosening, and a 'protective shield' from the US

HUNGARY - In Brief 11 Nov 2025 by Istvan Racz
The October CPI-inflation data, reported this morning, is almost normal, although not exactly a reason for enthusiasm, due to rising yoy core inflation. Monthly headline inflation was zero for the third consecutive period, leaving the yoy rate at 4.3%, also entirely unchanged since July. Core inflation was 0.2% mom, 4.2% yoy, the latter correcting back up from 3.9% yoy in each of the previous two months. This is no reason to expect any change in MNB policy. Analysts expected 4.4% yoy, followed by the headline rate falling to 3.7% yoy by December, only to rise again to 4.4% yoy by December 2026. Analysts indeed do not expect any MNB interest rate move before the election, and prospects on what may happen afterwards appear a little bit foggy at the moment.But this is not the important piece of news for today. Returning from Washington DC, Minister Nagy stepped into the limelight again yesterday, telling the media that they once again revised fiscal deficit targets upwards for 2025 and 2026, in view of GDP growth falling short of expectations this year. The new targets are 5.8% of GDP for 2025 and 5.9% for 2026, as for the central government by Hungarian definition and cash basis, and 5% of GDP both for 2025 and 2026, as regards the whole government sector by Eurostat definition and accrual basis, the main policy indicator.Putting this in context, the cash deficit comes from the 5.0% of GDP level actually recorded in 2024, and the new targets compare to the previously (early September) announced 5.5% for 2025 and the 4.6% target (set in June) for 2026. This means, a moderate HUF281bn increase for 2025, and a much bigger HUF1226bn increase for next year. Regarding the Euro...

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