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Hungarian inflation rate rose in August on gas prices

Hungary's inflation rate in August probably rose to the highest in 10 months after the government raised the price of natural gas as part of measures to narrow the budget deficit, a survey of economists showed. The inflation rate probably rose to an annual 3.6% from 3% in July, according to the median estimate of 9 economists in a Bloomberg survey. Consumer price growth probably accelerated to a monthly 0.4% from 0.2% in July. The government will release the report at 9 a.m. on Tuesday. Prime Minister Ferenc Gyurcsány’s government, struggling to trim the European Union's largest budget deficit compared with the size of the economy, is raising taxes and regulated prices to raise money to close the shortfall. The price of natural gas was allowed to rise 12.6% for companies and 30% for households on Aug. 1. „It's really the start of the effect of the government's measures,” said Nigel Rendell, an emerging-markets strategist with Calyon in London. „We had the first increase of gas prices from early August. I assume a fair chunk of that came through” in the latest figures. Gyurcsány wants to cut the deficit by EU standards from an estimated 10.1% of GDP this year to 3.2% in 2009 as part of preparations for eventual adoption of the euro.

The government's revenue-generating plan will boost the inflation rate by 1%age point in 2008 and 3 percentage points in 2007, the central bank said Aug. 28. The bank said the inflation rate will rise to 7% in 2007 from 3.8% projected for this year before it declines to 4.2% by 2008. The bank, which raised its key interest rate to 7.25% on Aug. 28, may boost rates further later this year to slow inflation, economists said, including Gergely Suppan at Takarékbank Zrt in Budapest. „Further rate increases are unavoidable,” Suppan said. „The inflation rate will probably jump in the next months as energy prices rise and the government increases the value-added tax rate on Sept. 1.” (Bloomberg)