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CPI slowed to 6.5% y/y in August
Thu, Sep 11 2008, 09:33 GMT
by Orsolya Nyeste
Erste Bank der oesterreichischen Sparkassen AG
Consumer prices dropped by 0.3% m/m in August, while the 12-month CPI inflation rate slowed to 6.5% (from 6.7% published for July). The y/y figure was slightly lower than our expectation of 6.6%.
The structure of the monthly index did not really come as surprise. Due to the seasonatilty, prices of foods and clothes contributed most to the monthly decline (-1.5% m/m and -3.7% m/m, respectively). In addition, fuel prices dropped by 4.5% last month. As exepcted, these price decreasing effects were partly offset by the accounting for the July increase in gas prices (11.6%). The monthly change of prices of durables were also negativ (-0.2%), based on the stronger forint exchange rate. Prices of services increased by 0.5% m/m.
The seasonally adjusted core inflation showed 0.3% m/m increase, while the 12 month core rate also slowed, to 5.8% from its July level of 6% y/y.
As for the short-term outlook, the disinflation process is expected to continue in the coming months, by becoming even swifter in the last quarter of the year, mainly due to the high base figures. One must note that the spectacular increase in food prices started in August 2007, which was the most important driver of the inflation.
As for the monetary policy, the central bank is unlikely to change its current “wait and see” mood, after the release of the August figures. A monetary council member, Gábor Oblath said to Bloomberg yesterday that the central bank had to see that there was an unequivocal start to disinflation. Thus, any rate reduction could not be expected before November, December. However, based on cautiousness of the council and uncertainties around wage developments, we still expect the first rate cut to be delivered just in 1Q09.
Market reaction: neutral.
Published on Thu, Sep 11 2008, 09:34 GMT
Erste Bank
http://global.treasury.erstebank.com | Rainer.Singer@erstebank.at
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