CPI slowed to 4.2% y/y in November
Consumer prices declined 0.2% m/m in November. Thus, the 12-month CPI inflation rate further slowed to 4.2% (from the 5.1% published for October). The figures surprised on the downside, as the market consensus for the 12 month rate was 4.6-4.8%. According to CSO’s comment, the 8.6% m/m decline in fuel prices pushed the headline index down by 0.5 percentage points. Prices of food were up just 0.1% compared to October. Thus, food and fuel prices developments as well as the favorable base effect have mostly contributed to the bigger than expected drop in the headline CPI. The only price increasing factor was that the 7.7% m/m increase in gas prices was accounted for in the November statistics, thus household energy prices rose 2.1% m/m. And last but not least, regarding question marks around inflation expectations, it seems as favorable that prices of services decreased by 0.3% m/m in November, after stagnation, seen October.
The seasonally-adjusted core inflation rose 0.1% m/m. Thus, the 12-month core rate also slowed significantly, to 4.1%, from its October level of 4.6% y/y. We expect the strong disinflation process to continue in the coming months, which suggests the continuation of rate cuts. One must note however that presently, instead of the inflation prospects, the financial stability is the key factor in rate decisions. Nevertheless, we expect the CB to carry out 50bp rate reduction on December 22.
