October CPI data: no surprise, firmly on upward trend on excluding-fuel-prices basis

HUNGARY - In Brief 10 Nov 2015 by Istvan Racz
Believe it or not, we finally scored on a monthly CPI forecast, expecting exactly the actual 0.2% mom, 0.1% yoy for October. The yoy rate was up from September's -0.4%. Fuel prices, which moved around the overall CPI quite erratically in recent months, fell further by 1.7% mom, but in yoy terms this meant a smaller drop (-16.5%) than in September (-17%). Importantly, the CPI adjusted for fuel prices rose 1.5% yoy in October, up from +1% yoy in the previous month. This measure bottomed out at -0.5% in November 2014, before rising to +1% or higher in each of the last six months. The October data reflected so far the highest yoy rise in this cycle. In other words, there can be little doubt that underlying inflationary pressures are rising, though recently this has been hidden by collapsing fuel prices. We remain of the view that yoy consumer inflation is heading towards 0.6% in November, 1.3% in December and 1.6% in January. At that point, the MNB base rate will be negative in real terms.

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