Hungary: Inflation jumps in January on VAT hike
February 14, 2012
In January, consumer prices added 2.1% over the previous month, which came in well above the 0.2% increase recorded in December. The monthly jump reflected an increase in the value added tax (VAT), which was raised from 25% to 27% in January. Higher prices for food as well as for alcoholic beverages and tobacco were mostly responsible for the monthly climb, whereas prices for clothing and footwear as well as for consumer durables declined over December. Owing to the strong monthly price increase, annual inflation jumped from 4.1% in December to 5.5% in January, which represents the highest reading since April 2010 and now 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 1.6% over the previous month, driving annual core inflation up to 4.9%. In its latest inflation report from December, the Central Bank expects inflation to end this year at 4.6%, which would again exceed the Central Bank's inflation target, which remains at 3.0%.