Hungary's CPI barely changed in March

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Putin’s threat leaves CEE currencies calm

Hungary’s CPI barely changed in March

CEE currencies shrugged off the threat expressed by Russian president Vladimir Putin regarding possible disruptions of gas supplies to the region. Putin warned that Russia would cut gas delivery to Ukraine if Ukraine would not pay back its debt amounting to 2.2 bn. USD. Although the CEE is highly dependent on Russian gas imports, regional currencies were not hurt by the statement. The Hungarian forint traded in a narrow range between 305.0-305.5 HUF against the euro, while the Czech koruna, like the Polish zloty posted only marginal losses.

Today, the Hungarian CPI is the most interesting release in the regional calendar. According to statisticians, consumer prices rose by a meagre 0.1 % in March compared to the same month last year and surprised thereby on the downside. The downward pressures on CPI stem from falling prices of electricity, gas and other fuels as well as cheaper clothing, footwear and consumer durables. Prices of alcoholic beverages, tobacco and services, in contrast, have risen. Compared to February, consumer prices rose by 0.2 %, inflation expectations are well anchored. In spite of low headline inflation, Hungary does not face imminent risk of deflation. Core inflation, ignoring administrative price cuts, was falling during the last three months; nevertheless, it still lies close to the 3% target. In March, core inflation dropped to 2.7 % y/y from 2.8 % y/y in the previous month. We believe that another reading below the NBH forecast, together with current strong levels of the forint, would move the NBH to cut its base rate at the next meeting scheduled for on April 29 to the new all time low 2.5 %.