Hungary: June Inflation Report summary
Overview:
The June Inflation Report sees a significant upward revision to the near-term inflation forecast due to the upward price pressures posed by imported inflation (higher commodity prices and a weaker Euro against the US$). The HUF has also weakened recently against the Euro due to unwise policy statements from the incoming Fidesz administration. However, the underlying inflation story remains little changed: domestic demand remains weak and core inflation subdued. Once the impact of tax increases in H2 2009 and at the beginning of this year fall out of the calculations inflation should fall from its current rate of 5.7% towards the medium-term inflation target of 3% by next year and remain there during 2012. This suggests that the central bank has little more room to cut its policy rate from here.