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Analysts see slowing inflation in May

Analysts polled by business daily Napi Gazdaság estimate that inflation slowed to 4.5% in May from the higher-than-expected 4.7% rate in April, when inflation probably peaked after gradually rising since January.

The Central Statistics Office (KSH) will publish May inflation figures on June 15.

Gergely Suppan of Takarékbank said the turnaround could be largely due to base effects such as the 10.8% price rise of pipeline gas supply in May 2010, which will now leave the base, and fuel prices, which were high last year, but were unchanged and occasionally even fell in May.

The May inflation figure is typically the most uncertain one of the year, primarily due to the prices of fresh vegetables, he added. Nevertheless, the rise in food prices could slow down in May and the coming months, Suppan said.

Dániel Bebesy of Budapest Alapkezelő said he expected food prices to continue to drive inflation considerably higher partly based on the farm gate price index, which points to a 10% rise in food prices this year. Price rises of consumer durables could be dampened, in contrast, by the strong forint, he added.

Suppan said inflation could slow down to slightly above 4% in the summer months, falling further in the autumn and sinking possibly below 3.5% by the end of the year.

Bebesy also expects a gradual slowdown in the remainder of the year. This will, however, only strengthen downside inflationary risks and will be insufficient to prompt a central bank rate cut, he said.