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CPI falls to 2.8% in September, below MNB target

Hungaryʼs annualized consumer price index (CPI) stood at 2.8% in September 2019, falling under the 3% target of the National Bank of Hungary (MNB) for the first time since January.  The central bank attributed the drop in headline inflation mainly to a drop in prices of unprocessed food and fuel.

Annualized CPI dropped from 3.1% in August.  The headline September figure was lifted by a 5.1% rise in food prices and an 8.4% increase in prices of alcoholic beverages and tobacco products, while prices in the category of goods which includes vehicle fuel dropped 1.0% as vehicle fuel prices declined 4.6%.

Clothing prices edged up 0.6%, household energy prices increased 0.7%, and consumer durable prices fell 1.4%. Services were up 3.4%.   

Harmonized for better comparison with other EU Member States, Hungaryʼs annualized CPI was 2.9% in September. Core inflation, which excludes volatile food and fuel prices, was a seasonally adjusted 3.9%, while CPI calculated with a basket of goods and services used by pensioners was 3.1%.

Excluding the impact of tax changes, consumer prices rose 2.7%.

In a month-on-month comparison, consumer prices were up 0.1% in September compared to August.

Consumer prices were up 3.3% in January-September 2019, compared to the first nine months of 2018.

MNB underlying inflation up to 3.4%

In its customary monthly analysis released after the publication of the KSH data, the MNB attributed the drop in headline inflation mainly to a drop in the price index for unprocessed food and fuel. Core inflation was lifted to 3.9% in September, from 3.7% in August, mainly by a rise in the price index of market services, the MNB said.

The central bankʼs measure of core inflation excluding indirect tax effects - which state news agency MTI describes as a bellwether indicator of underlying inflation - was 3.4% in September, climbing from 3.2% in the previous month.

After its monthly rate-setting meeting in September, MNB policy-makers said core inflation excluding indirect tax effects "is expected to rise slightly, before decreasing to 3% along a lower than previously expected path, due to external disinflationary effects."

The MNBʼs monthly analysis shows that its indicator for demand-sensitive inflation, which excludes processed foods from core inflation, stood at 3.1%, rising from 2.9% in the previous month.    The indicator for "sticky price" inflation, which includes items for which retail prices vary, on average, by no more than 15% a month, was unchanged at 3.4%.

The MNB said householdsʼ inflation expectations "remained moderate... at a level consistent with the 3% inflation target" in September.

Consumer price data for October will be published on November 8.