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Hungary Jan CPI likely driven down by base effects, stronger HUF, says City

Hungary's consumer inflation is likely to have eased substantially in January on the back of base effects and a stronger forint, but strong food and fuel price pressures still linger, London-based emerging markets analysts said prior to the data release, due next Tuesday.

Economists at major investment banks and financial consultancies, polled by Econews in London, ranged widely from 4.0% to 4.4% in their forecast, averaging at 4.24%.

Year-on-year headline inflation surged to 4.7% in December from a 4.2% reading a month earlier.

4cast, a major investment and financial consultancy that came in at the bottom of the forecast range predicting a 4.0% rate of annual CPI inflation for January, said that the anticipated deceleration has likely stemmed solely from base effects as CPI grew by 6.4% year-on-year in January last year, while the month-on-month trend remains on the rise as pressure from global commodities and foods “is still on”.

Overall, cost-push inflationary pressures are strong, and the question is to what extent these will feed through to market services and industrial prices and how permanently they will affect expectations, 4cast said.

On a similar note, Goldman Sachs said it expects Hungary's annual headline inflation to have slowed to 4.2% last month, mostly on base effects related to “a substantial increase” in prices in January 2010.

However, “we expect higher energy, fuel and food prices to continue to push up sequential, monthly inflation, although a stronger HUF should provide some protection from imported inflation”, analysts at Goldman Sachs in London added. (MTI-Econews)