Hungary: Inflation picks up in May
June 11, 2013
In May, consumer prices dropped 0.1% over the previous month, in contrast with the 0.3% increase recorded in April and market expectations of a flat reading. According to the statistical office, the monthly drop was driven by lower prices for transportation as well as for alcoholic beverages and tobacco.
Despite the monthly drop, annual headline inflation rose from 1.7% in April to 1.8% in May, slightly below market expectations of 1.9%. Despite the annual increase recorded in May, inflation still sits below the Central Bank's lower tolerance bound of 3% plus/minus 1 percentage points. Going forward, as inflation remains below the Central Bank's target, the Bank will have more room to engage in further monetary easing.
Meanwhile, the seasonally adjusted core inflation index, which excludes volatile items such as fresh food and fuel, fell 0.03% over the previous month. Annual core inflation rose from 3.2% in April to 3.3% May.
In its latest inflation report from March, the Central Bank projects inflation to end 2013 at 2.6% and to rise to 2.8% by the end of 2014. FocusEconomics panellists see year-end inflation at 3.3%, which is down 0.3 percentage points over last month's projection. Next year, the panel expects inflation to move up to 3.4%.