Actual CPI (Oct): 0.7 % m/m, 3.9 % y/y
Consensus: 3.7 % y/y
Previous (Sep): -0.1 % m/m, 3.6 % y/y
Inflation accelerated more that expected in October. The headline index was driven upward mostly by fuels, energy for households and by a seasonal increase in prices of clothing. There was also a significant impact of food prices that started to grow again following a decrease in the past several months. Services were the only sector where prices decreased.
Following October, the inflation is seen speeding up further in November due to a hike in excise tax. Especially its effect on fuels should be important. Then, a VAT hike is planned in January, which will bring another boost for consumer prices. The VAT will rise to 27 pct from 25 pct.
The MNB rates remain on hold and are still projected to stay stable in near future. But there is an increasing risk that a hike will come. The forint has come under pressure, posing an upward risk for inflation. Moreover, the central bank says that food and fuel prices, currently driving the inflation, have already spilled over into core inflation. This is important for monetary policy; the core inflation is already quite high as it holds around 3 pct.