Hungary: Oil prices main reason for higher cbank inflation forecast
Higher oil prices were the main reason behind the National Bank of Hungary’s (MNB) decision to raise its inflation forecasts for 2008 and 2009 in its quarterly Inflation Report published on Monday.
The MNB assumed a per-barrel oil price of $106.4 for the year in the latest forecast, up from a $90.9 price in the previous forecast in February. It increased the projection for 2009 to $106.3 from $88.3. It raised its inflation projection for 2008 to 6.3% from 5.9%, and the projection for 2009 to 4.2% from 3.6%. The higher oil prices translate as higher fuel, energy and producer prices, the bank said. They could also bring higher centrally-regulated prices.
In keeping with its usual practice, the bank calculated the forecast using the base rate at the time the report was prepared: 8.25%. (The rate was raised to 8.50% on Monday.) The forecast also calculated with a slightly stronger HUF/EUR rate of 255.2, compared to a rate of Ft 256 in the February forecast. For 2009 and 2010, the bank’s forecast is based on HUF/EUR rates of 257.6 and 257.7, respectively.
In spite of the significant rise in its inflation forecast, the central bank puts core inflation at 5.1% for 2008, down a slight one-tenth of a percentage point from the February forecast. Though it raised the forecast for 2009 core inflation one-tenth of a percentage point to 3.7%. The report puts 2010 core inflation at 3.0%, level with headline inflation. The quarterly forecasts, however, show core inflation exceeding the 2.9% headline inflation forecast by one-tenth of a percentage point in Q2-Q4 2010. (MTI-Econews)
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