Hungary CPI likely down on strong base effects

Food

Hungary's consumer inflation is likely to have eased last month on the back of potentially "very strong" base effects, London-based emerging markets economists said prior to Wednesday's data release.

An Econews survey revealed forecasts varying in a narrow range from 5.4% to 5.6%.

Year-on-year headline CPI inflation surged to a considerably north-of-the-consensus 5.9% rate in February.

Economists at JP Morgan said they expect inflation to have slowed down to 5.6% in March, due to base effects in food and fuel. Fuel prices jumped 3.4% month-on-month in March 2011, "while we estimate they rose about 1.5% this March ... Food prices rose 2.5% (month-on-month) in March 2011 while we estimate they rose about 1% last month".

"We expect inflation to remain above 5% through 2012 and to fall to 3.5% in 2013 as the impact of the tax hikes falls out", JP Morgan's London-based analysts said.

Economists at Bank of America-Merrill Lynch's London-based research unit - BofA Merrill Lynch Global Research - also said that high base effects due to food and fuel prices last year should see slower inflation in March, possibly down to 5.5% on a year-on-year basis. However, inflation will likely trend "well above 5%" for most of this year, driven by VAT hike, past HUF weakness and oil prices.

Analysts at 4cast, a major London-based financial consultancy, said they expect CPI to have decelerated to 5.4% year-on-year in March. "There are very strong base effects that are behind the deceleration of the y/y measure, with a massive price spike (in March last year) in fuel (3.5% m/m) and sugar prices (29.6% m/m) complemented by an electricity price increase and a hike in the prices of regulates services".

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