Hungary's inflation accelerates, but rate cut likely in June

Hungary's CPI inflation surprised to the upside for the second month during May: headline CPI was up 0.5% y/y, and core inflation picked up from 1.2% to 1.3%; the CenBank's tax-adjusted core inflation measure was flat at 2%. 

Low base-effects across a range of categories - from food to utilities - are now pushing headline inflation higher - during May, the reversing base effect of a 6.5% gas price cut last year played a particularly prominent role. 

Nevertheless, remarks from MPC members following the data made it clear that this kind of modest inflation acceleration will not deter the CenBank from cutting rates in June: the MPC will follow the inflation projections made in the Q2 inflation report, they noted, and not be swayed by month-to-month data releases. 

According to Commerzbank, the easing cycle is nearing completion anyway, hence this turn in inflation has fewer implications now, and NBH is expected to cut rates to 1.5% in June; and EUR-HUF to gradually rise to 315.00 by end-2015.