Hungary’s inflation sets 3Y record, still under expectations

As with last month, fuel prices supported the rise of the average consumer prices index in November, as a two-year downward trend had been clearly broken earlier this fall, CIB Bank said. “On a month-on-month basis, this was the strongest inflationary impact in November (1.1%) while food and clothes prices also contributed to the upward pressure. While the pickup of inflation may also reflect stronger domestic demand, this was not reflected in the m.o.m. index of service prices or in the prices of durable goods in November – they both showed stagnation. Core inflation rose slightly to 1.5% year-on-year,” the CIB flash noted.

However, CIB Bank stressed that Hungary’s inflation figure is still “far away” from the Hungarian central bank’s targeted 3%, therefore it may be considered low in absolute terms, despite an upward trend becoming clear recently. “Inflation was 1.4% y.o.y. in September 2013 and this November’s figure is the first above 1% since then. Nevertheless, according to our calculation annual average CPI may be close to 0.4%, i.e. the November figure does not reshuffle this year’s outlook. Also, we do not expect any shift in the monetary policy outlook,” the flash says.

CIB Bank analysts expect inflation to climb further next year, with y.o.y. indices above 2% in Q1 and the annual average also close to 2%.