Hungary: Inflation pressure weakens

Headline CPI declined to 2.1% year-on-year in December, slightly below market expectations, but matching the NBH’s call. Inflation came in at 2.4% in 2017 as a whole. Meanwhile, core inflation, which excludes raw food and energy prices, remained roughly flat at 2.6% YoY in the last month of 2017. For the whole year, the average rate of core inflation was 2.3%.

The main factor behind the deceleration of the headline CPI was the slowdown in fuel prices. Due to a strong base effect, prices of fuel increased by just 0.5% YoY, the second lowest rate in 15 months. Hungary's Central Statistical Office registered a 0.4% YoY drop in durable goods prices, another factor behind the slowdown of the headline rate. Inflation in services has finally increased somewhat, counterbalancing the price drop in durable goods, resulting in flat core inflation. Price increases in food, and alcoholic beverages and tobacco were again higher than the average inflation rate.