Hungary's consumer prices rose by 7.8% year on year in January against a 6.5% rise in December, the Central Statistics Office (KSH) said on Wednesday. Although inflation rise was widely expected the final figure exceeded the market consensus and was high above our expectations as well. The core inflation has also jumped to 5.6% compared to 5% in December.
Our view: The higher inflation was caused partly by administrative price hikes, specifically by distant heating prices (30.6 % m/m), pharmaceutical products (9.7 % m/m) and alcoholic beverages (2.6 % m/m), which would not be as such very alarming. In addition many components, which were unaffected by administrative price hikes, such as prices of clothes and consumer durables decreased in January (by 3.7% and 0.3 % m/m respectively). But what might indicate that secondary effects of price deregulation and tax hikes are starting to appear are food prices, which surged unexpectedly sharply in January by 1.4 % in monthly terms.
Although the January’s inflation has surprised us negatively we would not derive strong conclusions from this one figure. Regarding NBH we believe that for the central bank will be crucial new inflation forecast and also how the inflation will evolve in next months rather than the price rise in January. Given current information we hold our forecast that there won’t be rate hike on the next NBH meeting, although the voting will be tight.