MNB to lower inflation forecasts and re-open easing cycle in H1

Data released on Tuesday showed that Hungary's February CPI data were softer-than-expected. Headline inflation slipped to 0.3% y/y from 0.9% in January, while core inflation fell from 1.5% to 1.4% . The central bank's structural inflation measures of underlying inflation developments also fell slightly by 0.1-0.3pp.

Data reflects a stagnation of core inflation which has been fluctuating around these levels in the previous months. Fuel prices were once again one of the main factors behind the drop of CPI, but meat prices declined partly as well due to the VAT cut this year. Going forward, inflation will likely moderate further and there are chances that it may temporarily fall into a negative territory as well.

"The data are in line with the trend we were anticipating. We expect MNB to lower inflation forecasts and re-open the easing cycle, cutting rates from 1.35% to 1% this H1." said Commerzbank in a report.