HUNGARY: Headline CPI Expected to Remain Above Tolerance Range in September
CPI trends are expected to be broadly unchanged in September, with inflation expected to remain stable on a monthly basis. The annual figure is expected to edge marginally higher, to 4.4% y/y from 4.3% in August, due to unfavourable base effects in fuel inflation. However, this is expected to be mostly offset by seasonally lower services prices, relatively benign food price inflation (owing to the government’s profit cap measures), and lower imported good prices amid the stronger forint. The data will be released tomorrow morning at 07:30BST/08:30CET.
- Goldman Sachs expect headline inflation to be unchanged at 4.3% y/y. They note that there is upward pressure from base effects in fuel inflation, and outside of this, they expect most categories of the CPI basket to be soft, especially tradeables inflation, reflecting the appreciation of the forint throughout the year.
- ING expect the headline inflation rate to continue to be contained by the government’s price shield measures, with prices remaining stable on a monthly basis. Seasonality (mainly in services and clothing) will drive core inflation down, ING say, but they also expect the stronger forint to have a downward impact on imported goods prices.
- JP Morgan expect headline CPI to tick only marginally higher to 4.4%. They say food inflation likely dropped to 2.7% y/y from 3.9%, but they expect fuel inflation to provide an offset having likely increased to -0.6% y/y from -3.1%. Core CPI likely moved roughly sideways: in the NBH’s main metric, JPM see a tick lower to 3.5% y/y from 3.6%, but in the alternative measure (which also excludes processed food) they see the opposite, an increase to 4.0% y/y.
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LOOK AHEAD: US Macro: PPI (Wed) and CPI (Thu) Inflation
US PPI inflation is released on Wednesday before CPI inflation on Thursday, an unusual ordering that should see core PCE implications dialled in after the CPI release rather than the usual wide range waiting for specific PPI details. PPI will be watched more closely than usual this month after a far stronger than expected jump in last month’s July report fired a warning short over tariff-based cost pressures starting to feed through. That included a 0.6% M/M increase in our preferred core series of PPI ex food, energy & trade services, which strips out items such as the then booming portfolio management & investment advice category following the strength in equity markets. It's too early to gauge an accurate sense of analyst expectations for August.
CPI inflation on Thursday will then be the last major release ahead of the Sep 17 FOMC decision. Consensus looks for core CPI at 0.3% M/M after the 0.32% M/M in July, another monthly increase comfortably above a pace consistent with 2% inflation. August should in theory start to see the largest tariff impacts along with September and possibly October. Returning to July’s report, core goods inflation was softer than expected, at a still solid (by core goods standards) 0.2% M/M for a second month running but about half that of 0.4% expected by analysts. Instead, non-housing core services surprised higher. The latter was a “dangerous” development in the words of a usually dovish Chicago Fed’s Goolsbee (’25 voter), who speaking after Friday’s payrolls report is still undecided on a September cut whilst looking for August inflation data “to get more information”.
LOOK AHEAD: US Macro: Payrolls Preliminary Benchmark Revisions (Tue)
- The BLS on Tuesday will publish preliminary estimates of benchmark revisions, based off QCEW data for Q1.
- These will give an indication of the actual benchmark revisions on the Mar 2025 level of payrolls due with the Jan 2026 payrolls report released in early February.
- Bear in mind that the final benchmark estimate tends to nearly always be more negative than the preliminary figure – see historical values to the right.
- That doesn’t mean they can’t be large again after last year’s historically negative revision that lowered the level of payrolls by ~600k. Initial estimates we’ve seen look for another large downward revision, with the smallest being worth -550k but with wide ranges higher.
FED: Barclays Adds A Cut To 2025 Fed View
Barclays analysts now expect three Fed cuts in the remainder of the year, adding October to their pre-existing call for 25bp reductions in September and December. "Given the disappointing August employment report, we expect the FOMC to see more elevated downside risks to the employment side of the mandate."
- As for a 50bp September cut, "we think that the FOMC will view [that] as sending too strong a signal that labor market conditions are deteriorating. Indeed, we think that participants such as Powell understand that the slower pace of payroll employment reflects at least, in part, slower labor supply, which does not translate into increased labor market slack."
- For 2026 they continue to expect 25bp cuts in March and June to 3.00-3.25%, but "we do not think the FOMC will be able to cut rates more than twice next year, as we think that activity will show some slight acceleration, with the economy adapting to the new tariff environment and fiscal policy providing some support, and the unemployment rate will revert down amid limited increase in labor supply."
