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Disinflation Set to Accelerate on External, Internal Factors - MNB

Analysis

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The National Bank of Hungary (MNB) said both external and internal factors would support a continued acceleration of disinflation in the coming months in a quarterly report published on Thursday, state news wire MTI reports.

"The disinflationary effect of tight monetary policy, falling global commodity prices, declining domestic consumption and government measures to strengthen market competition is becoming "increasingly apparent" and disinflation "will continue to accelerate", central bank policymakers said in a summary of key findings in the fresh quarterly Inflation Report.

"Looking ahead, the continued fall in annual price dynamics is supported by both external and internal factors," they added.

The report shows CPI, which peaked at 25.7% in January, could fall into the single digits by year-end and return to the 2%-4% central bank tolerance band early in 2025.

MNB put this year's average annual inflation rate in a range of 16.5%-18.5%, narrowing from a 15%-19.5% forecast published in the previous report late in March.

Presenting the report, András Balatoni, a central bank director, said a drop in commodities and global food prices, as well as freight costs, had caused inflation to slow, but acknowledged that core inflation is declining "slowly".

He said headline CPI could fall under 10% by year-end.

GDP growth is expected to pick up from mid-year as inflation falls, he said.

MNB puts GDP growth at 0%-1.5% this year and at 3.5%-4.5% in 2024.

Balatoni noted a further improvement in Hungary's external balances and said the current-account balance could improve over the entire forecast horizon and show a surplus by 2025.

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