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Analysts: Hungary’s CPI could close at 1% for Dec

Hungaryʼs annual headline consumer inflation is likely to have accelerated to 0.9% last month largely on the back of base effects, but the recent oil price slump may well limit any further upside potential, London-based emerging markets economists said ahead of todaysʼs data release, news agency MTI reported.

The forecast calling for a 0.9% year-on-year headline rate is virtually a consensus view in London.

Analysts at JP Morgan said they expect base effects to have remained large in December, explaining why they look for a CPI jump in annual terms despite the likely fall in the monthly rate. They said they also look for about a 3.2% month-on-month fall in fuel prices, which is, however, less than the 5.9% fall in December 2014.

Going forward, JP Morganʼs economists lowered their end-2016 inflation forecast to 2.1% from 2.3%, and said that if oil prices remain at recent lows or move even lower, it would add further downside risk to their revised forecast.

Analysts at BofA Merrill Lynch Global Research, the London-based global research unit of Bank of America-Merrill Lynch, also expect a 0.9% annual headline rate for December on base effects, but they expect a moderate trend through most of 2016, averaging 2.1% this year.

The prospect of a return to the inflation target in Hungary, and its regional peers Czech Republic and Poland, is becoming more unlikely with the latest oil price slump, they added. With fuels taking the largest share in Hungaryʼs CPI basket compared to the other two CE3 economies, “we see 0.3 pp downside risk to our 2.1% average forecast for 2016 if the Brent average falls by USD 5/bbl in 2016” compared to Bank of America-Merrill Lynchʼs base case forecast of USD 50/bbl.