CPI-inflation for March out: further 'patience' from the MNB will be required

HUNGARY - In Brief 12 Apr 2023 by Istvan Racz

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Well, the CPI-inflation data for March, reported this morning, was just awful. For sure, the headline rate fell a little further, to 25.2% yoy, from 25.4% yoy in February, making March the second consecutive month with a decrease, from the peak 25.7% yoy in January. It is also true that in its late-March inflation report, the MNB's short-term forecast predicted a 0.8% mom headline rate for March, exactly matching the actual number. So much about the good part. The problem occurred with core inflation, on which KSH reported 1.5% mom, 25.7% yoy for March, the latter up from 25.2% in February and 25.4% in January. But how come? Well, this was in part because fuel prices, not part of core items, fell 2.6% in March, implying 1.1% mom non-fuel inflation for the month, down slightly from 1.2% in February and 1.8% in January, but leaving the yoy non-fuel rate at an unchanged 24.7%. This is fully in order, we would say. In general, we have a much higher esteem for fuel prices, from the policy point of view, than statisticians and most analysts, not least because the secondary impact of fuel prices, which is just very important, is not excluded from the core index at all. What we like much less, however, is the following sentence in KSH's brief comment on its March numbers: 'The prices of household energy decreased by 3.8%, within which for pipeline gas, 8.7% less had to be paid' (in March alone, this means). Hmmm! The thing is that in reality, the prices of gas did not fall by a single dime in March. It is only that KSH is supposed to have information on the structure of gas consumption monthly. And if they find that the weight of the use of unsubsidised (expensive) gas fell ag...