Daily News Hungary economy

Budapest, March 8 (MTI) – Consumer prices in Hungary rose by an annual 2.9 percent in February, accelerating from a rise of 2.3 percent in January to just under the central bank’s mid-term “price stability” target.

Emerging market analysts in London had forecast February CPI at 2.8-2.9 percent.

The National Bank of Hungary’s measures of underlying inflation rose but were still “broadly unchanged” in February compared to the previous month, the central bank said in a monthly assessment on Wednesday.

The indicator for core inflation, excluding indirect tax effects, was 1.8 percent in February, rising from 1.6 percent in the previous month. The indicator for demand-sensitive inflation, which excludes processed foods from core inflation, was 1.6 percent, edging up from 1.5 percent. The indicator for sticky price inflation, which includes items for which retail prices vary on average no more than 15 percent a month, rose to 1.9 percent from 1.7 percent.

In spite of the increases, the NBH noted that the indicators “and are still within the 1.5-2.0 percent range”.

“In February, changes in the prices of the more volatile items with greater sensitivity to cost changes, ie, food and energy had an upward effect on prices. The price index will decrease in spring due to base effects,” the NBH said.

“Households’ inflation expectations have been broadly unchanged in recent months and remained at moderate levels, in line with underlying inflation developments,” it added.

Analysts interviewed by MTI said the inflation rate had been in line with expectations.

ING Bank senior analyst Péter Virovácz said inflation was likely to stay at a relatively high level over the coming months. He attributed the expected rise to an anticipated further increase in unprocessed food prices and the prices of raw materials. Inflation pressure could ease in the second half of the year, he said, projecting an average inflation rate of 2.5 percent for 2017.

Takarekbank analyst Gergely Suppán forecast average annual CPI at 2.4 percent. He added that rising domestic demand and wages could drive up inflation. Suppán added that by early next year, inflation could reach the National Bank of Hungary’s official 3 percent target thanks to the fading effects of this year’s VAT cuts.

Erste Bank chief analyst Gergely Urmossy reckoned that the inflation rate was likely to peak in March. He put the average annual inflation rate at 2.5 percent, adding that it could be followed by rising core inflation. He said it would likely become clear in the first half of next year whether the inflation rate would stabilise at the 3 percent target.

Sándor Jobbágy of CIB Bank said that although the inflation rate could reach or even exceed the central bank’s 3 percent target over the coming months, it would likely slow back down to around 2.5 percent in the middle part of the year. Jobbagy said he did not expect a steady rise in inflation over the course of the year, but projected an average inflation rate over 2.5 percent.

Source: MTI

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