In December 2006 consumer prices increased by 0.1% compared to the previous month and increased by 6.5% compared to December 2005, which was in line with our prediction and very close to marker consensus.
Our view: The result of December’s inflation was not surprising. Food prices has risen by 0.3 % m/m, which was slightly less than we have been expecting but at the same time clothing and footwear recorded slightly faster price rise in comparison to our estimates. Simultaneously, this price rise was partly counterbalanced by drop in fuel prices, which dropped by 1.1% in monthly terms. As we have expected the impact on the market was negligible, since investors are rather waiting for this year’s inflation, which should peak already in the first quarter because of further price deregulations as well as tax rises. Taking into account December’s CPI data we do not change our opinion on monetary policy and believe that NBH will hold rates unchanged on its next meeting on Monday, January 22.