All forecasts in ruins: CPI-inflation sharply up in January

HUNGARY - In Brief 11 Feb 2025 by Istvan Racz

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No forecast survives the first contact with reality, it seems, one could say paraphrasing general Moltke's famous claim, which is widely known from history. For January, the MNB predicted the headline rate of CPI-inflation at 4.6% yoy in late December. This was followed by a much more recent analyst poll by Portfolio.hu, in which the median expectation was 4.9% yoy (we went with the crowd this time, honestly). Against all this, the actual headline rate was reported this morning as 1.5% mom, 5.5% yoy, sharply up from 4.6% yoy in December, and only 3% yoy in September, which appears to have been clearly the bottom of the cycle in hindsight. Core inflation was no better at all: it was 1.4% mom, 5.8% yoy, the latter also rising sharply from 4.7% yoy in December. Note: year-on-year changes in percent; Source: KSH, own estimates Some explanation for this major undershooting by forecasters is offered by a 9.9% mom rise by telephone and internet prices, which added 0.25% to the CPI and 1% to the prices of services within the CPI. This went in pair with a somewhat mysterious 6.8% mom decrease on the same line in October, which was eventually explained by a (not very visible) temporary sales campaign by unnamed service providers. The sales campaign, so the story goes, ended in December, the underlying discounts disappeared, and prices went up again. In addition, KSH reported 3.7% mom rise for network gas prices, which was nothing else than statisticians playing around with the numbers, using an accounting method that has been questioned by several experts already, while the prices charged to customers actually did not change. The impact of this latter item on the CPI was somewha...