CPI-inflation was marginally stronger than expected in November

HUNGARY - In Brief 10 Dec 2019 by Istvan Racz
CPI-inflation for November turned out to be just a bit stronger than expected (3.3% from us, 3.35% from the Portfolio.hu consensus). The actual number was 0.1% mom, 3.4% yoy, the latter up from 2.9% in October, on a fuel-price-related base effect, as we pointed that out in a preview note the other day. But the real difference from our forecast is that fuel prices proved to be somewhat weaker, whereas non-fuel inflation actually rose by 0.2% mom, rather than by 0.1% as predicted. Consequently, the yoy rate of non-fuel inflation rose to 3.8% from October's 3.7%, whereas core inflation remained unchanged at exactly 4% yoy.Our main scenario for the coming months is changing slightly as a consequence, so that we expect the headline rate to rise to 3.9% yoy in December, then further to 4% in January, to be followed by 3.9% in February and a descending trend afterwards. This looks like a bit of a close call, considering the 4% tolerance ceiling, but we are reasonably sure that the MNB will be able to easily live with this prospect and the related risks, especially as adjusted core inflation, their stated key policy variable, fell marginally, to 3.6% yoy in November, and this exactly represents their standing forecast for the average level in Q4 2019.

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