Budapest, June 9 (MTI) – The National Bank of Hungary sees no threat of deflation in the country despite inflation being well below the 3 percent target, a senior analyst at the central bank said on Thursday.
András Balatoni told public news channel M1 that Hungary is in no way threatened by the level of deflation Japan battled in the 90s. This is guaranteed by Hungary’s rising wages and also by the country’s dynamic economic growth, which stabilises price levels, he said.
Further, core inflation, which strips out volatile fuel and food prices, is above 1 percent, Balatoni added.
He said the low CPI would have a positive effect on Hungary in the short run, as it leads to a growth in consumer purchasing power, which will increase consumption.
Balatoni added, however, that prolonged deflation is unfavourable for the economy as it results in declining revenues for companies, forcing cuts in labour costs, which leads to downward wage spirals, he said.
Data released by the Central Statistical Office on Wednesday put the May inflation rate at negative 0.2 percent.