April CPI out tomorrow: prepare for the headline rate deeply below 4%

HUNGARY - In Brief 08 May 2025 by Istvan Racz

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The headline rate went up to 5.6% yoy in February, from where it came down to 4.7% yoy in March. Against that, a further drop to below 4% in April may look extraordinary. But circumstances are extraordinary, too.For one thing, fuel prices (7.3% of the CPI basket) dropped substantially again in April. Holtankoljak.hu, the online retail price-watching device for fuels reported -1.8% mom, -6.7% yoy for the average retail price. KSH's data is never the same, but it tends to be reasonably close. Second thing, monthly non-fuel inflation could be down to 0.3%, the same as in March, and two decimal points down from April 2024, even without Mr. Nagy's admin cap on food retail margins. This is because of the strengthening forint, and also because of weak fuel prices, both of which should contain inflation already in short term.OK, but fuel prices down by, say, 6% yoy as per KSH, and non-fuel inflation at 0.3% mom would translate to 3.8% yoy as for the April CPI headline rate. However, the one-off impact of the price (retail margin) cap will also appear this month. Should the Economy Ministry's estimate on the impact, -18.6% for the affected items, prove to be fully representative and be equal to the net effect, this would mean -1.1% for the whole CPI, meaning the impact of the measure alone. But that is most probably (indeed very likely) not the case: instead, the total net impact may be somewhere at 0.5-0.8% (the MNB expected 0.8%). So, please, be prepared for a somewhat weird-looking April headline rate between 3-3.5%.For sure, a word of warning is also due here. The uncertainty of any forecast is extremely high in this case. It is no accident that the 12 analysts contributing...