Hungarian CPI was slightly better than our prediction in December, the result was on the lower end of analysts expectations. The prices increased mere 0.1% m/m, bringing the y/y fig-ure down to 6.8% from 7.1% in November. There are two main reasons for the decrease: food prices fell rather sur-prisingly by 0.3% m/m and petrol prices posted another significant drop, as prices in transportation fell 0.7% m/m following the decline by 1.7% in November. The remaining components maintained recent positive tendencies. Major-ity of items showed lower y/y change compared to Novem-ber, although higher y/y changes seem to be more frequent than in recent months. Clothing accelerated slightly from 4.8% y/y to 5.0%. On the other hand, consumer durables posted unusually strong decline by 0.3% m/m, or –0,7% y/y. Home improvement products increased only 0,2% y/y and energy prices only by 0,1%. The positive tendencies are illustrated by the core inflation that decelerated to 8.1% y/y from 8.4% y/y. Average inflation reached 9.2% in 2001.
Although the decline in inflation was again enabled by foods and fuels, recent positive tendencies remained intact. The influence of stronger forint on prices of imported goods is spilling over to other sectors. The central bank can continue to cut rates.
(Jakub Dvorak, CSOB)