October CPI declines to 7.6% y/y from 8.0%y/y in September, 0.3% m/m, core inflation declines to 8.5% y/y.
October inflation came out exactly as we expected and slightly better than the market was looking for. Although the food prices posted higher y/y value than last month, the majority of other items showed lower pace in y/y terms, which resulted in the decline of the overall y/y figure to 7.6% from 8.0%. Automotive fuels and telecommunication prices showed monthly decline in October. Also important was the decline in the year on year change of consumer durables and clothing prices. Food prices and – often regulated- housing prices maintain high pace, but are also on a declining trend for a couple of months.
The overall slowdown of inflation is also reflected in the decline of the core inflation from 8.7% to 8.5%. October data fit in the scenario expected by the central bank. The NBH in its inflation report released today said that it expects the y/y CPI to fall to 7.5% by December 2001 and to 4.3% by December 2002. The October result was as broadly expected and the central bank certainly counted with good inflation when it cut rates yesterday. Therefore we do not expect rates to be cut next Monday at the regular central bank session.
(Jakub Dvorak, CSOB)