Consumer inflation continues to accelerate, though not in a runaway fashion

HUNGARY - In Brief 08 Apr 2022 by Istvan Racz

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The year-on-year rate of CPI-inflation rose further to 8.5% in March, from 8.3% in February, on a 1% rise of the CPI in March alone.Despite the increase, this may look like a relatively favourable figure, as analysts' median expectation was 8.65% and the MNB predicted something in the 8.5-9% range. However, this is not entirely so, as the headline rate, which we are talking about, was held back from a bigger increase by the impact of the administrative cap on basic fuel prices and by the lack of further (EU-policy-driven) increases in excise taxes on tobacco products. Core inflation was a more negative 1.1% mom, 9.1% yoy, the year-on-year rate coming from 8.1% in February.CPI-inflation is being driven up mainly by food prices, which rose by 13% yoy in March, after 11.3% yoy in February and 8% yoy in December. Here, an administrative price cap is currently enforced on seven basic items. The official claim is that this measure may be reducing the overall CPI by about 1% currently, but we think that this only refers to the direct impact. Everything taken together, the net impact is probably around zero, as wholesalers and retailers, the latter including hyper- and supermarkets and small shops, can easily compensate themselves by raising the prices of unregulated items.Importantly, the unregulated wholesale price of fuels rose by no less than 18% in March alone, against which the consumer prices of fuels remained completely unchanged, because of the administrative price cap. Fuel prices would have been 29% higher for the consumer in March, had the price cap not been enforced. This took 1.8%-point out of yoy CPI-inflation directly, by our own rough estimate, and possibly ab...