MNB-friendly inflation data out for January

HUNGARY - In Brief 13 Feb 2018 by Istvan Racz

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CPI-inflation was 0.3% mom, 2.1% yoy in January, as released by the KSH this morning. The yoy rate was unchanged from December. Fuel prices rose by 1.5% mom, meaning that non-fuel inflation was 0.2% mom, the same as in January 2017, and 2.4% yoy, the latter also unchanged from December.Core inflation, as calculated by the KSH, fell to 2.5% yoy in January, from 2.7% yoy in the previous month. The MNB's three adjusted core rates fell very slightly, to 1.7-2.2% yoy from December's 1.8-2.2% yoy range.In fact, there was hardly any adjustment in administratively set prices in January, one exception being a 3% rise in the average fees charged for postal services. At the same time, VAT cuts on a few items, including fish, restaurants and internet services pulled down the CPI by cca. 0.2% (our estimate), just as VAT cuts of similar size on different items did in January 2017.All this was in line with market expectation, and also with the forecast given by the MNB in its latest quarterly inflation report (2.1% yoy for Q1 2018). It seems the MNB has every reason to relax hearing this data. A lot less friendly recent release from the KSH was the 6.5% yoy jump by construction industry producer prices in Q4, up from 5.6% yoy in Q3. But producer prices in construction have no direct way to get transmitted into the consumer price area.