Cyclical peak of inflation may come in early 2023 - MNB's Mr. Virág spoke in the press

HUNGARY - In Brief 16 Sep 2022 by Istvan Racz

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In today's Magyar Nemzet, vice governor Virág said that Hungary is now close to the cyclical peak of inflation, but unlike a possible peaking in Q4 this year globally, Hungary may only see the peak reached in early 2023. In more detail, he said: - A turnaround is seemingly in the making in inflation at the global level;- Uncertainty is high, the key factor being the hectic movement of European gas and electricity prices;- Inflation in Hungary will continue to increase in the coming months, but it may start to decrease from early 2023 if the European energy situation does not deteriorate further;- This autumn will bring about a further wave of rising food prices, and this will have a significant impact of GDP growth as well;- Food prices may start to correct with the new agricultural produce from next spring;- In a favourable case, real GDP may moderately increase in 2022 and 2023 as well. Most importantly, Mr. Virág said that the Bank will continue to raise the base rate to the point where the latter's level can be safely regarded as higher than the inflation expected for the subsequent one-year period. Interestingly, Mr. Virág preempted with this interview the MNB's Q3 inflation forecast, which is due to be discussed by the Monetary Council at the September 27 rate-setting meeting. Why he gave the interview we can only speculate on; our guess is that it was deemed to offset the impact of recent negative news on inflation prospects and the odds regarding Hungary's access to EU funds, with a view to keeping the EURHUF exchange rate on track until the Council's next meeting. In our view, there are basically three problems with Mr. Virág's view, as expressed in the interv...