May inflation data due tomorrow, and some fiscal data reported

HUNGARY - In Brief 10 Jun 2025 by Istvan Racz

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For headline CPI-inflation, analysts in Portfolio.hu's monthly poll expect 4.2% yoy, unchanged from April, as regards the median forecast recorded by the survey. For end-2025, the headline rate is expected to decrease to 3.9% yoy. We fully agree with this forecast for May, and also with the expectation that consumer inflation may end this year at slightly below 4%. As for our numbers, the May forecast means -0.1% mom inflation, which would be composed of -3% mom for fuel prices and a positive 0.1% mom in non-fuel inflation, the latter slightly down from 0.2% mom in May 2024. Importantly, the expectation of year-on-year inflation below 4% assumes the continuation of the current weak economy (with GDP growth typically seen no higher than 1% for this year), energy import prices staying at their present low level, tight monetary conditions maintained (with at most 50bps of base rate cuts towards the end of the year, and the existing administrative price regulations remaining in place. A legitimate question could be if price regulation should push inflation lower in May, especially in view of the extension of its scope, to include a number of household chemicals, body-care products, etc. during the month, but the answer is a clear NO. All of the (one-time) impact of the regulation affecting certain food items (6% of the CPI basket) was included already in the April data. As for household goods, the scope of the price cap (more accurately the cap on the gross retail margin) is smaller (1.5-2% of the CPI basket), and it was introduced on May 19, meaning that the very big majority of the impact should affect the June numbers only. On fiscal matters, a bonus piece of news for o...