Headline CPI-inflation to have risen sharply in December

HUNGARY - In Brief 12 Jan 2020 by Istvan Racz

The December CPI-inflation data will be released on Tuesday. On this occasion, the yoy headline rate is likely to rise sharply, to 3.9% from November's 3.4% and October's 2.9%, essentially due to a sizeable base effect related to fuel prices. Please, kindly take note that the MNB is unlikely to react to this change, as it is perfectly in line with their expectation. According to the supporting tables of the December inflation report, the Bank predicted then the headline rate at 4% yoy in December, 4.3% yoy in January and 4.1% yoy in February, before falling back to 3.6% yoy in March. The MNB made absolutely no comment and it took no measure whatsoever to correct this uptick by the headline rate, providing evidence that it is ready to tolerate the headline rate temporarily exceeding the ceiling of its tolerance range, set around the 3% medium-term target.Actually, it may be more interesting to see what the various core rates did in December. In November, core inflation was 4% yoy, adjusted core inflation was 3.6% yoy and non-fuel inflation stood at 3.8% yoy, all standing somewhat dangerously close to the 4% tolerance ceiling. We do not expect any of the latter to move in December.

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