Yoy consumer inflation likely to rise temporarily in September

HUNGARY - In Brief 08 Oct 2018 by Istvan Racz

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KSH is scheduled to put out its CPI-inflation data for September at 9am Budapest time tomorrow. We expect the yoy headline rate to rise further, to 3.6% from August's 3.4%. This forecast is based essentially on three factors:(1) a likely 1.4% mom rise by fuel prices, on the back of a 1.5% mom increase in the wholesale prices of fuels during the month;(2) a base effect, as non-fuel inflation was a non-seasonal -0.1% mom in September 2017, in a great part due to a government measure (they started to distribute textbooks free of charge in elementary schools in that month); and(3) an average 3.5% administrative lifting of tobacco prices, with an estimated impact of +0.17% on the CPI.As a result, we expect +0.2% mom, +2.7% yoy for non-fuel items, the latter up from 2.4% in August.Perhaps it is needless to say that the MNB is unlikely to react with any measure to an increase in the headline rate like this in September. One reason is the MNB's heavy loosening bias, and the other one is the fact that the rest of the year is likely to see somewhat lower readings for the yoy headline rate, with possibly a 3.3% value in December.