Hungarian inflation of 7.4% in December
Hungarian annual inflation was 7.4% in December, the Central Statistical Office (KSH) announced on Friday. Rising prices for cigarettes and motor fuels continued to be the main drivers, although food and durable consumer goods prices outpaced headline inflation.
Spirits and tobacco prices rose 8.9%, including a 12.7% rise in the price of tobacco products. Prices for the category of goods that includes vehicle fuel rose 11.7%, with vehicle fuel prices jumping 25.9%. Food prices increased by 8% and consumer durable goods prices increased by 7.5%.
Core inflation, which excludes fuel and food price volatility, was 6.4%.
The CPI calculated with a basket of goods and services used by retirees was 6.7%.
Month-to-month inflation was 0.3%.
Average annual inflation was 5.1% in 2021, although adjusted for better comparison with other European Union member states, the figure was 5.2%.
The central bank noted in response to the data release that inflation was unchanged from the previous month in December, placing Hungary among European countries that saw inflation accelerating come to a halt at the end of the year. Core inflation and core inflation excluding the effects of indirect taxes increased by 1.1 percentage point to 6.4%. This increase was offset by more moderate inflation in the price of fuel, alcohol and tobacco, he added.
Commenting on the data, analysts said inflation had risen due to the “surprisingly strong” rise in food prices.
K and H senior analyst David Nemeth said inflation is expected to slow in the next 6 to 12 months. Annual inflation is expected around 5.5%, with December data possibly falling below 4%, he said. Government measures such as caps on staple food and fuel prices would reduce inflation, he said, but uncertainties about the duration of the fuel price cap make the magnitude of this effect unpredictable, he said. he declared.
ING Bank’s Peter Virovacz said the price cap should reduce inflation by 0.1 to 0.2 percentage points. Meanwhile, January should see even stronger price increases ahead of the introduction of price caps, he said. ING calculates inflation of 5.6-5.7% in 2022, he said. ING also expects the central bank to raise interest rates further in the coming months. How much the January data will depend on, he said.
Gergely Suppan of Takarekbank said underlying inflation of 6.4%, an “unexpected jump”, was due to soaring food prices. Inflation is expected to ease in the coming months, although international trends will keep it higher than previously expected, he said. Other risks include wage increases, rising labor costs and consumption growth, he said. Takarekbank raises its inflation forecast to 5.5% for 2022, he said.
Gabor Regos of Szazadveg Gazdasagkutato highlighted the importance of January inflation data, which will show retail price increases and affect monetary policy over the coming year. Szazadveg expects inflation to be above 5% in 2022, he said. Wage increases will lead to increased retail turnover, he said. Normalizing markets, easing supply difficulties and tight monetary policy would curb inflation, he said.
Erste Bank‘s Janos Nagy said capping staple food prices would reduce drifting prices in the sector, but would do little to slow inflation, which is expected to reach the target of by 2023 at the earliest. Several sectors expect prices to rise by 10 to 20% in 2022, he said. The expansive fiscal policy planned for the year is also a price risk, he said. The inflation rate in 2022 is expected to exceed 5%, he said.