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Higher-than-expected May CPI augurs price acceleration in coming months

A higher-than-expected rise in consumer prices in May augurs a further acceleration in inflation in the coming months, analysts told MTI.

Twelve-month consumer prices rose 3.8% in May, the Central Statistical Office (KSH) said in the morning. The figure was well over the 3pc rise estimated by analysts. Month-on-month, prices jumped 1.5%, largely on the back of higher food prices.

Raiffeisen Bank's Zoltán Török said the monthly rise in food prices was bigger than the increase in any month since 1998. He warned that the effects of fuel price rises over the past several weeks would show up in June inflation data, perhaps pushing the headline figure over 4%. Year-end twelve-month CPI could rise over 8%, and average annual inflation is likely to exceed 5% for both 2009 and 2010, he added.

Török criticized the National Bank of Hungary's (MNB) stress on looking at inflation data adjusted for the effect of an increase in Hungary's main VAT rate from 20% to 25% from July 1. CPI is well over the central bank's 3% mid-term “price stability” target, he added.

TakarékBank's Zoltán Ádám said seasonal food prices pushed up May CPI. Although this tendency will not continue, pressure on global food prices as well as the effects of drought in Hungary will probably continue to cause overall food prices to push up CPI, he added.

Ádám said twelve-month inflation would average more than 6% in the second half of the year. He put year-end inflation at 6.3% and average annual inflation at 4.7%.

The higher-than-expected headline figure for May will make rate-setters' decision making a little easier as the prospects for a rate cut narrow, he said. (MTI – Econews)