Analysts: Record CPI dip no cause for alarm
Today's announcement that the Hungarian Consumer Price Index dropped 0.3% in June, the biggest such drop since figures were kept, does not mean it's time to sound the alarm about deflation, analysts told BBJ.hu.
“Despite the negative annual CPI, no deflation risk is present in Hungary, but the fundamental inflation pressure is also marginal,” said a statement by local analysts for Erste Bank, Gergely Gabler and Orsolya Nyeste.
The statement projected flat prices for the rest of the year, and a yearly average inflation rate of 0.3% or less.
According to Győző Eppich, an analyst with OTP: “The main reason for the negative inflation rate is a decrease in seasonal food prices, especially the potato prices which declined by 31% compared to the previous month according to the seasonally adjusted data.”
Both Eppich and Gabler noted that the government’s moves to cut utility costs earlier this year created artificial deflationary pressure.
“Certain government activities have had deflationary effects. If we discount these activities, Hungarian inflation would be around 1% which would be good by EU standards, as in CEE inflation is very low,” said Eppich. He added that the EU’s low inflationary environment is having an impact on Hungary and noted that euro-zone central bankers are working to increase inflation. “Inflation will get back to 2% in the next year,” Eppich said.
Erste Bank’s statement also projected steady prices: “As for the outlook, the 12-month CPI rate is expected to fluctuate around 0% in the coming months and should reach 1% only in December, due to low base figures from last year. The annual average inflation rate may be below our current 0.3% expectation. However, next year, the CPI should approach the 3% central bank target.”
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