Stunned analysts predict inflation above 7% in Hungary

Surprised by Tuesday’s (9 November) announcement that Hungary’s inflation hit 6.5% in October, experts predict the next six months could bring even higher inflation still as well as sizable central bank rate hikes, Telex reported.

Péter Virovácz, an analyst at ING, said that despite the already heightened inflation expectations, the latest data again managed to surprise analysts.

In his view, this spike in inflation, which far exceeded the market consensus, cannot simply be attributed to low-interest rates.

Analysts expect the trend to continue, with worse inflation data expected in November.

János Nagy, a macroeconomic analyst at Erste Bank, predicted the annual rate of increase in November could exceed 7%.

Dávid Németh, an analyst at K&H Bank, said demand could only rise, with soon to come cash benefits for pensioners and families such as bonuses, inflation adjustment, the 13th-month pension, and the family tax rebate pushing domestic demand.

Moreover, Lajos Török, senior analyst at Equilor Zrt., said the situation is partially driven by emerging oligarchic markets. According to him, the previous abundance of money and low-interest rates led to firms buying up competitors.

This has improved their economies of scale but simultaneously left so few players in the market that they can raise and dictate prices because there is not as much competition.

Török added that the central bank would have to act, and instead of the planned 15 basis points increase to the current base rate of 1.8%, he expects a 30-50 basis points increase in November.

The Hungarian central bank is set to decide on the rate next Tuesday (16 November).

(Vlagyiszlav Makszimov | EURACTIV.com with Telex)