Napi Gazdaság analyst poll predicts Aug. inflation of 6.6% yr/yr

The Central Statistics Office (KSH) will publish Hungary’s August inflation data on Thursday. The analysts said that a sharp rise in food prices in August 2007 has provided a high base, while grain and oil prices have recently slipped from their earlier peaks. They expect the current downward correction in food prices to continue throughout the rest of the year, noting the earlier anticipated 10% increase in domestic gas prices from October has been reduced to 6.55%.

Analysts also added that torpid external markets are not conducive to wage increases, which should also serve to mitigate the rise in inflation. However, an analyst noted that a potential tax cut could nonetheless produce a rise in net wages even if gross wages remain the same, which could fan inflation in the business sector. A potential increase in the VAT rate from 20% to 23% still not excluded and this could increase the fundamental course of inflation by up to 2% points.

The analysts by Napi Gazdaság said that the National Bank of Hungary (MNB) might cut interest as early as November if no unfavorable developments take place in the Hungarian economy. The analysts added, however, that the MNB could choose to defer a cut in key-interest until next year. A rise of the euro-forint rate to much above 240 could also induce the MNB to postpone a cut in interest rates.

Consensus among the analysts polled by Napi Gazdaság was that Hungary’s inflation rate would decrease to 5.6% by the end of the year and to 3.5% by the end of 2009, thus making it possible for the government to meet its 2010 inflation target of 3.0%. (MTI-Econews)