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Higher-than-expected December inflation likely to produce MNB rate hike

The Central Statistical Office's Friday-morning publication of data showing Hungary's December inflation rate to have accelerated to a higher-than-expected 4.7% in December is likely to induce the National Bank of Hungary to raise interest rates in January, analysts told MTI on Friday.

Twelve-month consumer price inflation in Hungary was 4.7% in December after staying flat at 4.2% in November and October. December consumer prices rose 0.4% from November. Annual average consumer price inflation was 4.9% in 2010, KSH said.

The twelve-month CPI was up from the 4.46% average estimate of London analysts or the 4.4% consensus in a poll by Hungarian business daily Napi Gazdaság.

Zsolt Kondrát of MKB Bank commented that analysts had expected December inflation of 4.6%, noting that the greater-than-expected rise in fuel prices had raised the inflation figure, while food and centrally regulated prices served to moderate inflation during the month. Kondrát remarked that the higher-than-expected inflation could serve as the basis for the National Bank of Hungary to continue hiking interest rates.

The MKB analyst predicted that January inflation would be 4.3%, adding that food inflation could be high during the month, while fuel inflation should fall due to a high base.

Gergely Suppan of Takarékbank also attributed higher-than-expected December inflation to rising fuel prices, like Kondrát, noting that factors which could limitedly influence monetary decisions contributed to the price rise. This said, the higher than expected inflation could trigger further rate hikes in January or February, he said. Suppan remarked, however, that the National Bank of Hungary is unlikely to continue on its current rate-hiking cycle after the composition of its monetary council changes in March.

The Takarékbank analyst also agreed with his MKB Bank peer's January inflation forecast of 4.3%, noting that the base effect of the excise tax raised at the beginning of 2010 will no longer exercise an impact on inflation during the month.

Zoltán Török of Raiffeisen Bank said that higher-than-expected December inflation would seem to be an argument for a rate-hike in January, adding, however, that the monetary council also takes Hungary's risk profile, CDS spreads, forint rates and other market factors into account when making its rate decisions. These develop more favorably recently, not necessarily justifying a rate rise, he said. Török remarked that National Bank of Hungary monetary-council member Csaba Csáki suggested this week that the council may not raise key-interest in January following rate hikes in December and November. (MTI-Econews)