Inflation maintained its rapidly ascending trend in May

HUNGARY - In Brief 08 Jun 2022 by Istvan Racz

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CPI-inflation was reported at 1.7% mom, 10.7% yoy for May this morning. This came after 9.5% yoy in April, and generally the trend of recent months has been a rapidly ascending one: CPI-inflation and core inflation Note: % yoy changes; Sources: KSH, own estimates The forint slightly weakened on the news, but it did so without much reason, we think. Expectations were set by the MNB's earlier statement that the May headline rate figure was likely to be around 10.5% yoy. One could say, of course, that wow, the actual exceeded forecast, but in the current extremely fast-moving world, in terms of the frequency and the pace of repricing developments, the MNB's performance on this prediction should be regarded as enviably high accuracy. Anyway, the fact remains what the chart above is telling. Core inflation was even higher the the headline rate, at 12.2% yoy, as it was not held back by the fixed consumer price of fuels. The key driving forces of inflation are still energy, through an indirect impact, food prices (up 3.5% mom,18.6% yoy, and extremely robust domestic demand (nominal wages rose by 21% yoy in Q1). Producer price pressures remain very high: agricultural prices +37.4% yoy in March, industrial prices +28.8 yoy in April, merchandise import prices +26.3% yoy in March. Going forward, next time the MNB is updating its inflation forecast (on June 28 actually), it is very likely to predict double-digit average headline inflation for this year, moving up from a broad range predicted in late March, which then settled down at 8.9% for purposes of fiscal calculations. Correcting our monthly path of inflation only for the actuals that have been revealed since then takes the f...