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May CPI better than expected, say analysts

May inflation data was better than expected, and a slowdown in the rise of food prices was especially surprising, analysts said on Wednesday.

Consumer prices in Hungary rose 3.9% in May from the same month a year earlier, slowing from a 4.7% increase in April, the Central Statistics Office (KSH) said early in the day. The headline figure was well under the 4.5% estimate by Hungarian analysts and the 4.4% estimate by emerging market analysts in London.

Takarékbank’s Gergely Suppan said the slowdown in food price inflation was an unexpected turnaround, while the deceleration in other categories, such as vehicle fuels, were augured by a high base. Inflation is likely to slow further in the coming months, reaching 3.4% in December and averaging out to 4% for the full year, he added.

In spite of the better than expected headline figure, Suppan said it was probably still too early to consider a rate cut by the National Bank of Hungary.

Bálint Török of Buda-Cash Brokerház said the slowdown in food prices, although a positive surprise, could be temporary, adding that it was too early for monetary easing.

Raiffeisen Bank's Zoltán Török said rate-setters were unlikely to cut the base rate because of the data. He put CPI between 3.8% and 4.0% for the rest of the year.