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October 1% inflation a 3-year record

Food

Hungary’s October inflation figure of 1%, announced this morning by the Central Statistical Office (KSH), was higher than the market consensus of approximately 0.8%, reaching a peak not seen in three years, CIB Bank notes in a flash report sent to the Budapest Business Journal today. The changing trend of increasing fuel prices helped boost inflation.

Reaching a three-year peak, Hungary’s inflation was 1% in October compared to the same month of 2015, which CIB says exceeded the expectations of pundits. “Fuel prices supported the rise as a two-year trend has been clearly broken – with a 1.6% rise y/y and 3.9% m/m,” the CIB flash adds. 

Food prices also moved higher in October, while the rise in clothing prices was above average due to the usual seasonal factors, CIB Bank states. While the pickup in inflation may also reflect stronger domestic demand, this was not reflected in the month-on-month shift in service prices, nor in the prices of durable goods in October, the report adds. Core inflation came close to the expected average for this year, at 1.4% in October, compared to the corresponding month a year earlier, CIB observes.

“Though inflation is still far away from the central bank’s target of 3% and may be considered low in absolute terms, the upward trend has become clear,” the CIB analysis says. “Inflation was 1.4% y/y in September 2013 and this October’s figure is the first to touch 1% since then. Nevertheless, according to our calculations, annual average CPI may be close to 0.5%, i.e. the October figure does not alter this year’s outlook. Also, we do not expect any shift in the monetary policy outlook.”

CIB Bank notes that half an hour following the KSH’s CPI release, the Hungarian forint exhibited a slight weakening, while market movements were also influenced by weaker-than-expected industrial production figures, also issued by the KSH today. The EUR/HUF rate hovered mostly at 305.50-306, CIB notes.

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