Preview for tomorrow's data release: year-on-year CPI-inflation is expected to have fallen sharply further in January

HUNGARY - In Brief 08 Feb 2024 by Istvan Racz

---

Local analysts asked in Portfolio.hu's survey have a median expectation of 4.2% yoy, following 5.5% yoy in December. In the Q4 inflation report, out in late December, the MNB predicted 4.8% yoy, but on January 30, right after the monthly rate-setting meeting, Mr. Virág said that it might have fallen even to 4% yoy in January, which would be the top end of the Bank's medium-term target range. We expect 4.5% yoy for the month, composed of a single-month 1% price rise for non-fuel items and a 3.4% monthly rise by fuel prices. On the latter, the original expectation was a roughly 7% monthly rise by fuel prices in January, caused by a substantial increase in the related excise tax right at the start of the year. The tax rise actually happened, but in the last minute, MOL, the government-dominated fuel wholesaler monopoly, decided to pass on the extra cost by raising its prices in two steps, delaying close to half of the impact on consumer prices until February, essentially smoothing out the impact of the tax hike. As a result, average gas station prices, as reported by the privately run Holtankoljak.hu local price-watching service, rose by only 3.4% in January, and then further by 4.7% to date in February. This may explain a good part of growing optimism as to analyst/MNB expectations regarding the January inflation figure. BUT: Please, note that the same analyst poll includes a median expectation of 5.1% yoy CPI-inflation for December 2024. In other words, the median analyst expects rising inflation between January and the end of this year. This is the same pattern as the one we indicated in our latest forecast paper and we are still holding: our end-year inflation forecas...