CPI-inflation, core inflation sharply up in January

HUNGARY - In Brief 11 Feb 2022 by Istvan Racz

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Unfortunately, those analysts (including us), who expected the yoy headline rate to move upwards in January have proven right. But even they (including us again) were negatively surprised by how sharply the headline rate actually jumped, to 7.9% yoy from the previous two months' 7.4% yoy level. This took place on a 1.4% monthly rise. The yoy headline rate is the highest value seen since August 2007.Anyway, the yoy increase by food prices accelerated to 10.1% from December's 8%, so indeed some pass-through took place from the existing very high pressure in producer prices (see our related note of yesterday), and that should not be taken as entirely unexpected. The strength of food prices (+3% mom) would suggest a more moderate monthly rise by core inflation in itself. But no, core inflation rose by the same 1.4% mom as the headline rate, which translated into 7.4% yoy, up from 6.4% yoy in December and the highest since December 2001. This is because the moderating impact of (the exclusion of) food prices was compensated by the widespread administrative fixation of energy prices, affecting most of household energy and two basic types of car fuel.Most importantly, inflation is evidently proceeding in the opposite direction compared to the MNB's standing forecast, issued in the Q4 inflation report of mid-December. The Bank predicted then a distinctly descending path for the headline CPI-inflation rate, with 6.7% yoy for January and 6.4% yoy for Q1. So, at the minimum, one should expect a substantial upward revision of the MNB inflation forecast in late March, and the continuation of the month-by-month upward adjustment of all MNB interest rates. At this moment, we have the...