Inflation picture turned even more ugly in September

HUNGARY - In Brief 08 Oct 2021 by Istvan Racz

CPI-inflation for September was reported as 0.2% mom, 5.5% yoy this morning, the yoy headline rate rising to a 9-year peak level, quite sharply up from 4.9% in August. Core inflation also rose markedly, to 4% yoy from the previous month's 3.6% yoy. Analysts expected 5.4% yoy and the MNB, in its latest inflation report, had a forecast range of 5.2-5.6% yoy for the September headline rate. Fuel prices, up 0.4% mom, were no particularly important contributors to this month's consumer inflation.Now, the 0.2% monthly inflation rate was not at all extraordinary for a September. The problem with the yoy rate was much more that base effects turned unfavourable once again, for September 2020 was an extraordinary period, one in which consumer prices fell by 0.4%, in general because of the Covid-driven weaknesses typical for those times.So in itself, the September CPI-inflation reading would not be any great tragedy. The problem is much more what is likely to come. For one, the little increase in fuel prices in September (see above) did not reflect the average 1.8% increase in the prices charged by MOL to retailers in the same period, so it looks like some of the latter will be passed on to consumers probably in October. In addition, MOL's wholesale prices have continued to rise rapidly so far this month. Should they stay at today's level, the average rise of wholesale fuel prices would reach 7% this month alone. Adding this and some carry-over from September to the CPI, plus expecting the same amount of non-fuel inflation for the rest of 2021 as the actual rise was in the same period of last year, which is a set of conservative assumptions, the resulting headline rates are 5.9% ...

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