Inflation remained at a 14-year peak in December, beating forecasts once again

HUNGARY - In Brief 14 Jan 2022 by Istvan Racz

Forecasts by private sector analysts (with a median value of 7.1% yoy) and by the MNB (6.9% yoy given in the Q4 inflation report of late December) were defeated again by the actual 7.4% yoy headline rate of CPI-inflation in December, as reported today. This was the same number as in November, which more or less everyone expected to be a peak value, from which the December data should reflect some decrease.In itself, this negative figure meant a monthly inflation rate of 0.3% only. But as fuel prices fell by 5.3% in the month, non-fuel inflation was 0.6%, and core prices rose 0.8%, in a month when they are normally held back by producers' and retailers' increased efforts to sell large quantities during the Christmas shopping season. Much of the blame for this has been directed towards food prices, which rose by an unusually high 1.4% in December and 8% yoy, but consumer durables and services also made a material contribution. Just as a remark on our part, agricultural producer prices were up by 26.1% yoy in October (the latest available), so the forceful adjustment of consumer prices of food cannot be any great surprise.Anyway, core inflation rose sharply to 6.4% yoy and non-fuel inflation accelerated slightly to 6.6% yoy in December, so they are not sharply lower than the headline rate any more. As an immediate response, the government cabinet decided yesterday a consumer price ban on seven very basic food items: consumer prices on those will have to be taken back to their mid-October level on mandatory basis for a yet undetermined period. This measure is widely believed to serve little more than election campaigning purposes, without any major real impact on inflation...

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