Here is the actual October CPI-inflation data: lower than expected

HUNGARY - In Brief 12 Nov 2024 by Istvan Racz

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The headline rate is reported at 0.1% mom, 3.2% yoy, materially below the expected 3.4% yoy (MNB, ourselves) and 3.5% yoy (analysts' median forecast - see yesterday's note). Perhaps more importantly, core inflation was only 4.5% yoy, rather than the 5% indicated in the MNB's forecast chart, on no change at all in October alone. Note: Year-on-year changes in percent; Source: KSH As for our 0.3% mom, 3.4% yoy forecast, half of the two decimal point difference from that came from lower fuel prices (up only 0.8% mom according to KSH), and the other half came from only 0.1% mom rise by non-fuel prices, rather than 0.2% mom, as in October 2023. This, and lower than expected core inflation suggests that the weak economy is kind of taking over. This means, in our view, that the MNB could still reduce the base rate by its now usual 25bps if it were about current inflation only. However, cutting the base rate at the current EURHUF 411 could be understood by the market as the MNB intentionally allowing the forint to weaken further, which would be quite dangerous. The MNB is more likely to take the view next week that the recent HUF depreciation has been sufficient loosening of monetary conditions in itself for now.