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Higher-than-expected components of February inflation could give NBH pause - City says

London-based emerging market analysts say some higher-than-expected components of Hungary's February inflation, published on Tuesday, will not prompt a central bank rate rise, but could mean rates will fall more slowly than expected, MTI's London correspondent reported.

Twelve-month consumer prices rose 8.8% in February, the Central Statistics Office (KSH) said on Tuesday. The headline figure was in line with market expectations, and the National Bank of Hungary (NBH) said earlier that inflation would peak around 9% in February or March, said UBS analyst Reinhard Cluse. Cluse said that the twelve-month CPI could be 0.2-03 percentage points higher this month. He put year-end twelve-month inflation at 5.1%.

Cluse still expects the bank would start reducing the base rate from the middle of the year, cutting at least a combined 75bp from the current 8.00% by year-end. He did not exclude the possibility of a larger-scale loosening, however. Analysts at Goldman Sachs, however, said higher-than-expected rises in the price of services could give the NBH pause and slow its expected campaign of rate cuts. Food prices on the whole increased at a dropping rate, and a further rise in the prices of processed foods could be rather a late response to the earlier rise in non-processed foodstuff. GS noted, however, that, with food being an component consumers face the most often, this could still unfavorably affect inflationary expectations. (Bloomberg)