MNB raises inflation forecasts for 2016 and 2017

MNB

The National Bank of Hungary (MNB) raised its forecast for average annual inflation this year to 0.5% in its fresh quarterly Inflation Report from 0.3% in March, state news agency MTI reported yesterday.

The MNB raised its projection for 2017 inflation to 2.6% from 2.4%. 

The MNB released the main projections in the report yesterday, but will not publish the document in its entirety until tomorrow.

According to a fan chart published yesterday, inflation is projected to reach the tolerance band around the central bankʼs 3% mid-term inflation target by the end of this year, slightly earlier than projected in the March report.

The mid-term inflation target is 3% within a +/- 1 percentage- point tolerance band.

The MNB left its GDP growth projections for both years unchanged: at 2.8% for this year and 3.0% for 2017.

In a statement released after a policy meeting yesterday, the MNBʼs rate-setters acknowledged a slowdown in year-on-year GDP growth in the first quarter, but attributed the drop to “temporary, one-off effects” such as factory shutdowns and a slower drawdown of European Union funding. They noted that the latest data show industrial output rose in April and retail sales continued to expand. Economic growth is expected to “pick up markedly” following the slowdown at the beginning of the year, they added, pointing out measures supporting the expansion of home construction and the faster drawdown of EU transfers.

The government projects 0.4% inflation this year and 0.9% next year. The government forecasts 2.5% GDP growth in 2016 and 3.1% growth for 2017.

Inflation was 0.2% year-on-year in January-May. Last year, average annual inflation was -0.1%.

Hungaryʼs GDP rose 0.9% year-on-year in Q1. It was up 2.9% for 2015.

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