What's takeaway 1 on Hungarian inflation stays cool during the heatwave?

Hungarian inflation dropped to 1.7% in June, indicating effective price control.

What's takeaway 2 on Hungarian inflation stays cool during the heatwave?

Weak food price inflation and a strong forint contribute to moderating price pressures.

What are the market implications for Hungarian inflation stays cool during the heatwave?

Market participants should closely monitor for any signals from the National Bank of Hungary regarding potential easing measures, especially as inflation continues to trend downward. The 1.075 level in EUR/HUF could serve as a pivotal point for positioning strategies amid this shifting backdrop.

What are the risks to this view on Hungarian inflation stays cool during the heatwave?

A reversal of this bullish stance could occur if inflation unexpectedly accelerates due to external shocks or if the National Bank of Hungary signals a more hawkish stance in response to broader economic pressures. Additionally, significant appreciation of the forint against key currencies could also alter the inflation dynamics.

Hungarian inflation stays cool during the heatwave

What the desk is arguing

The desk asserts that Hungary's lower-than-expected inflation rate signals a potential shift towards looser monetary policy by the National Bank of Hungary. This view is supported by the recent inflation print, which not only showed a decrease from 1.8% to 1.7% year-on-year but also defied expectations of a modest uptick.

This outcome indicates the effectiveness of the forint in moderating inflation, particularly in the face of rising global energy prices. As noted, food prices have remained stable, and even saw a monthly decline of 0.2%, reinforcing the outlook that further monetary easing may soon be on the table as central bank dynamics continue to evolve.

Where it sits in our coverage

Our current consensus target for the EUR/HUF pair stands at 1.075, with estimates ranging from 1.04 to 1.12. Specific firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)

The desk's outlook aligns with the upper bound suggested by jpmorgan and diverges from the cautious position taken by bofa, positioning it firmly at the optimistic end of the spectrum.

How other firms see it

Firms like jpmorgan are aligned with the positive outlook towards Hungary's inflation trajectory, indicating support for easing measures. Conversely, bofa holds a contrary stance, forecasting a stronger currency with a target at the lower end of the range.

The narrative also intersects with broader European monetary policy trends, particularly with regard to the EUR/USD trajectory and its implications for regional stability and interest rate settings.

Older quick take Quick take 11:49 Hungary Hungarian inflation stays cool during the heatwave Inflation inched lower once again in June, despite the global price shock caused by geopolitics. The strength of the forint appears to be more effective in stabilising prices than anything else. We have revised our inflation trajectory downwards once again, which has pushed us into the camp expecting more monetary easing People cool off during a heatwave in Budapest, Hungary Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Peter Virovacz Chief Economist, Hungary 1.7% Headline inflation (YoY) ING estimate 1.9% / Previous 1.8% Inflation inches lower again The price level in June 2026 remained unchanged compared to the previous month, according to the latest data released by the Hungarian Central Statistical Office (HCSO).

As expectations had already predicted a fairly low inflation rate, this comes as no great surprise. Contrary to the short-term trajectory outlined in the National Bank of Hungary’s (NBH) June Inflation Report, year-on-year inflation continued to slow in June. The annual rate of price increases stood at 1.7%, having declined by 0.1ppt from the previous month.

Thus, despite the global energy price shock, Hungarian inflation has not only failed to accelerate, but has actually slowed further over the past two months. Main drivers of the change in headline CPI (%) Source: HCSO, ING "> Source: HCSO, ING The details Like in many other European countries, food inflation was a key reason behind the moderate price pressure. On a monthly basis, food prices dropped by 0.2%, with only the 'eating out' and 'coffee, tea and non-alcoholic beverages' categories showing a price increase.

Consequently, year-on-year food inflation almost dropped to zero in June. The forint helped to tame not just food inflation, but also the prices of durable goods , which have been falling for the third consecutive month. This time, they fell by 0.1% month-on-month.

Year-on-year inflation in this product category slowed to a level close to headline inflation. Household energy prices moved higher in June due to the colder weather this spring compared to last year, as changes in energy bills and statistical prices are reflected with a lag due to methodology. Although the government phased out the fuel price cap in late June, this happened after the data collection period (which takes place on the 1st and 20th of each month) had ended.

Therefore, the actual drop in fuel prices will be reflected in the July data, and fuel prices remained statistically unchanged in June. Inflation in the services sector remains the main contributor to overall price pressure, accounting for around two-thirds of overall inflation. However, the monthly repricing driven by seasonality was lower than usual.

Nevertheless, the 4.0% year-on-year price increase indicates clear pressure points in this category, such as rent, personal care and health services, communication and recreation services. Unsurprisingly, labour-intensive activities are showing the strongest price pressures due to rapidly rising labour costs. The composition of headline inflation (ppt) Source: HCSO, ING "> Source: HCSO, ING Core inflation steadies at a low rate The core inflation rate, which is adjusted for price changes in volatile items such as energy and fuel, has remained at around 2% year-on-year since the beginning of the year.

In June, it was 2.0%, which is higher than the headline figure, mainly due to high service inflation. However, favourable local and global effects are keeping core inflation in check, with no evidence of second-round effects from the global energy price shock. The central bank’s underlying inflation measures also show moderating price pressures, with sticky price inflation inching down to 3.6% YoY.

Thanks to the moderating price pressures, households' inflation expectations continued to drop, approaching a level that could be labelled as anchored expectations around the inflation target. Headline and underlying inflation measures (% YoY) Source: NBH, ING "> Source: NBH, ING Both short and long-term inflation outlook improves Looking ahead to the coming months, service inflation is expected to increase further, primarily due to the expiration of voluntary price caps and the subsequent price hikes already announced for summer and autumn in telecommunications and financial services. The strength of the forint may continue to keep inflation in durable goods in check, while extreme heat may lead to higher household energy bills due to increased energy consumption.

We do not anticipate any significant changes in food prices, so we expect low inflation in this area in the near future. According to our latest flash estimate, headline inflation may not reach 3% until the end of the year. Consequently, we are now projecting an average inflation rate of just 2.1% for this year.

The average inflation rate could reach 3.3% in 2027 and 3.0% in 2028, primarily due to demand-driven price pressures as the negative output gap in the economy turns positive in the years ahead. While this would be positive in itself, the path to euro adoption means that the real inflation target should be 2% as we are approaching the end of the decade. It looks like summer rate cuts are a done deal In our view, today’s inflation data effectively seals the deal on a rate cut in July, and, unless there is another geopolitical escalation, a cut in August is also highly likely.

Another low inflation print in July would pave the way for the announced 'mini' rate-cut cycle to expand into a 'midi' cycle, with monetary easing continuing into autumn. We anticipate a lengthy pause in the easing cycle at 5.00%, which we expect to be reached in an uninterrupted sequence of moves in the months ahead. Prices National Bank of Hungary Monetary policy Inflation Hungary CPI Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.

The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Older quick take

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