In spite of low inflation, rate cut not seen till next year - analysts


The inflationary trend and weak domestic demand warrant a base rate cut by the National Bank of Hungary, but it is unlikely to happen before next year because of the sour mood on global markets and stability risks, analysts told MTI on Monday, after the publication of fresh inflation data.

Consumer prices climbed 3.6% in August, year-on-year, accelerating from a 3.1% increase in July, the Central Statistics Office (KSH) said early Monday. The headline figure -- boosted by food, vehicle fuel and household energy prices -- was slightly over analysts' estimate of 3.3-3.4%.

Gergely Suppan of Takarékbank attributed the higher than expected headline figure to base effects: a cut in the price of electricity dropped out of the base period and food prices fell at a slower rate than in the same month a year earlier. A jump in food and fuel prices will fall out of the base period in the coming months, but excise taxes will rise in November, he said, putting year-on-year CPI at around 3.7% but falling to 3.4% by December.

Suppan put average annual inflation at 3.8% for 2011 and around 3% for 2012, but he said rate-setters were unlikely to start loosening until the middle of next year because of stability risks.

Erste Bank's Zoltán Árokszállási conceded government measures announced over the past several days could add a few tenths of a percentage point to CPI, but he left his projection for annual average inflation this year at 3.8%. He raised his projection for 2012 from around 3% to 3.3-3.5%.

Árokszállási said central bank rate-setters would probably not start a loosening cycle until the first half of next year because of the unfavorable mood on external markets.


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