Effect of weaker forint on CPI puzzling - analysts
Analysts agreed that an increase in the excise tax on vehicle fuel contributed strongly to Hungary’s higher CPI in November, but the effect of the weaker forint was a more perplexing question.
Consumer prices in Hungary rose 4.3% year-on-year in November, accelerating from a 3.9% increase in October on higher food and fuel prices, the Central Statistics Office (KSH) said on Tuesday.
Zsolt Kondrat of MKB Bank said the headline figure was over the bank’s estimate of 3.9%. The increase in vehicle fuel prices was expected, but the 1.2% month-on-month rise in food prices was a surprise that could be the result of the weaker forint, he added. At the same time, he noted that the price of consumer durables had edged down 0.1%.
Gergely Suppan of Takarekbank interpreted the drop in consumer durable prices as a sign the weaker forint is having a limited effect on inflation. He put CPI at 4.2% year-on-year in December.
Mr Suppan said further tightening at a meeting of National Bank of Hungary rate-setters next week could not be excluded, considering risks to financial stability, the weak forint and high risk premia. He added that the decision could be affected by talks between Hungary and the IMF as well as changes on global markets.
Mr Kondrat said rate-setters would likely raise the central bank’s key rate by 25bp in December and again by 25bp in January, bringing it to 7.00%.
SUPPORT THE BUDAPEST BUSINESS JOURNAL
Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.