Hungary's October inflation beats forecasts, spikes to 3-year high

Hungary's Central Statistical Office (KSH) released earlier on Thursday Hungary's inflation data for the month of October. Data showed that Hungary’s inflation rose to 1 percent in October compared to the same month of 2015, reaching a three-year peak. Inflation reading was more than forecasts at 0.8 percent.

The changing trend of increasing fuel prices helped boost inflation. Fuel prices broke a two-year trend with a 1.6 percent rise y/y and 3.9 percent m/m supported the rise in inflation. Food prices also moved higher in October, while the rise in clothing prices was above average due to the usual seasonal factors

Core inflation came close to the expected average for this year, at 1.4 percent in October, compared to the corresponding month a year earlier, CIB observes. Hungary’s inflation swung back to positive territory in September following four months of deflation in a row. The October reading strengthens hopes of a significant recovery in the headline data, which will support the Hungarian Central Bank's pledge to hold benchmark interest rates unchanged.

“Though inflation is still far away from the central bank’s target of 3% and may be considered low in absolute terms, the upward trend has become clear,” the CIB analysis says. “Inflation was 1.4% y/y in September 2013 and this October’s figure is the first to touch 1% since then. Nevertheless, according to our calculations, annual average CPI may be close to 0.5%, i.e. the October figure does not alter this year’s outlook. Also, we do not expect any shift in the monetary policy outlook.”

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