Actual: 5.5% y/y
Consensus: 5.7% y/y
Previous: 5.9% y/y
Consumer prices increased by 0.8 pct. m/m in March, repeating the February reading. In y-o-y comparison, the inflation data are slightly better than expected as the price growth eased to 5.5 pct. The key source of inflation were prices of alcoholic beverages and tobacco that showed a 3 pct. monthly growth, boosted by the hike of excise tax on tobacco. Also the fuel prices pushed the index higher. The price of crude oil has decreased after reaching a short-term peak in the first half of the month, but the fuel prices have not yet reflected the decrease. Food is still an important source of inflation, too. However, monthly growth in food prices has slowed to 0.8 pct. from the high figures at the beginning of the year, despite the significant increase in egg prices. On the other hand, inflation in March was tempered by prices of durable goods, services and clothes.
The March report has brought evidence that the inflation may have started a downward trend, but remains high and so is the core figure (5.0 pct. y/y). Moreover, risk assessment is still a problem as Hungary has not yet reached the agreement with the IMF/EU and as the risk premia on Spanish and Italian bonds are currently on the rise. Therefore, it is too early to talk about a potential interest rate cut. We still expect the rates to stay stable.