Extraordinary disinflation in December

140115_CPI_ENMonth-on-month inflation was also extraordinarily low at -0.5% in December 2013. The latter was primarily the result of the October cut in energy prices that made household energy 8.1% cheaper m-o-m. In addition, food prices dropped by 0.3% m-o-m.

Last year’s annual average inflation was 1.7%, according to both the national and the Eurostat methodology. Annual average core inflation was significantly higher at 3.3%.

In January 2014, we expect further disinflation followed by some potential acceleration in February-March. In Q1 2014 annual inflation is likely to stay below 1%, increasing the likelihood of further cuts in the MNB base rate.