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Seasonal food, service prices bring down CPI

Analysts attributed lower-than-expected September consumer price inflation published on Tuesday to lower prices for seasonal food and services. They said retailers had still not passed on the full effect of a VAT rise in July on to consumers. The CPI could pave the way for another central bank rate cut, they said.

Twelve-month CPI in Hungary slowed to 4.9% in September from 5.0% in August. The figure was well under analysts' consensus of 5.2%. Prices dropped 0.1% a month after a monthly drop of 0.3% in August.

Budapest Alapkezelő Dániel Bebesy said lower seasonal food prices and vacation costs were behind the drop in the headline figure. Lower petrol prices had a smaller effect on CPI, he added.

The 2.0% month-on-month rise in new car prices came as a surprise, especially considering the forint's firming, Bebesy said.

Lower consumption as a result of the economic crisis continued to counter the effect of an increase in Hungary's main VAT rate from 20% to 25% on July 1, Bebesy said, adding that he was lowering his projection for twelve-month CPI in December from 7%-8% to about 5.7%.

If the forint does not suffer some external shock and if the inflation trend remains, the National Bank of Hungary could lower rates by another 50bp to 7.00% at the end of October, he said.

Raiffeisen Bank's Mátyás Kovács also said September CPI fell on seasonal food prices and service prices. Rising clothing prices were due to the VAT rise in July as well as the introduction of the autumn line, he added.

Kovacs put year-end CPI around 6% and said the central bank would lower rates at least 25bp, but more likely 50pb, at their next meeting. More rate cuts could follow before year-end, he added. (MTI-Econews)