Hungarian inflation accelerated to 2.9% y/y in February, pushing the reading above already high market expectations, statistics office KSH reported in a first release of data on March 8.
The rise in CPI represents a four-year high, and follows a rise of 2.3% in January that also surprised by its pace. The details suggest that while global commodities prices remain in the driving seat, core inflation is also on the march. Consumers paid 19.9% more for motor fuels in February. Food prices rose 1.9%.
While consumer durables cost consumers 0.4% less, core inflation pushed to1.8% year-on-year, in a rising trend that brings it close to a two-and-a-half-year peak, estimates CIB Bank. The pickup in inflation may, therefore, reflect stronger domestic demand, the analysts add.
CPI swang back into positive territory in September following four months of deflation in a row. The acceleration of the headline inflation rate seen in the final three months of 2016 is, as expected, continuing early this year.
However, the pace is a surprise, and could start to impact the dovish stance of rate setters at the Magyar Nemzeti Bank (MNB) should it continue unabated and pass the central bank's 3% target. However, the monetary council has made it clear it will hold out if possible, with economic growth its priority - the economy disapponted last year with expansion limited to just 2% - while it considers inflation remains externally driven.
The MNB continues to use unconventional tools to ease monetary conditions, while it has held the benchmark at a record low 0.9% since May.
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