October CPI-inflation still shows acceleration, though less steep than in previous months

HUNGARY - In Brief 09 Nov 2022 by Istvan Racz

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Figures for the headline rate were 2% mom, 21.1% yoy, the latter up from 20.1% in September, and above the 20.7% yoy median expectation of analysts asked in Portfolio.hu's poll. Core inflation rose to 22.3% yoy from the previous 20.7% yoy, on a 2.2% mom rise in October. Household energy rose by 64.4% yoy, food, which has a big-weight in the basket, went up by 40% yoy, whereas fuel prices remained unchanged for household customers. For business customers, i.e. those filling up the tank of a car owned by an enterprise, the prices of fuel rose by 5.4% yoy, but that is not included in the CPI. Just one-month after the big impact of the August price reforms, meaning the government raising retail prices for gas and electricity, the essential question for today's data release was if inflation is proceeding along the path predicted by the MNB in late September (19.2-22% yoy in December), or it is moving much more aggressively upwards, in line with the prediction given by economy minister Nagy yesterday (to 25% yoy in December). For now, the correct answer appears to be neither, ... nor, although actuals seem to be going more the MNB's way, taking aim at a 22-23% yoy value for the headline rate, as regards the end-year figure. However, one needs to remember the unusually big risks, meaning a major adverse development in the European energy situation in the forthcoming winter period, and the potential adverse impact of the renewal of annual gas and electricity supply contracts for local enterprises, which is due to take place typically in Q4. Should all this come out badly, minister Nagy could be still vindicated in the context of his more pessimistic inflation forecast.