Hungary Inflation


Inflation rises to highest level in nearly two years

In February, consumer prices added 0.8% over the previous month. The reading came in at nearly a third of the strong 2.1% increase observed in January, which had reflected a rise in the value added tax (VAT) from 25% to 27%. February's monthly increase was mainly driven by higher prices for food, alcoholic beverages and tobacco as well as for electricity, gas and other fuels. Owing to the strong monthly price increase, annual inflation jumped from 5.5% in January to 5.9% in February. The figure marked the highest reading since March 2010 and beat market expectations that had inflation inching up to 5.6%. At the current level annual inflation sits well above the Central Bank's 3.0% inflation target with a 1.0 percentage point tolerance margin. Meanwhile, the seasonally adjusted core inflation index, which excludes volatile items such as food and fuel, increased 0.6% over the previous month, driving annual core inflation up from 4.9% in January to 5.4% in February. In its latest inflation report from March, the Central Bank projects inflation to end the year at 5.1% before falling to 2.8% by the end of 2013.


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