Inflation close to nil in March

In140411_CPI_ENflation in March was a mere 0.1% year-on-year and 0.2% month-on-month. This was broadly in line with expectations and also with our forecast of 0.9% average annual inflation this year. Inflation all together is slowing down: core inflation decreased from 2.8% y-o-y in February to 2.7% in March. Yet, by the end of the year we forecast headline inflation to accelerate to about 2.4% y-o-y on base effects as well as on growing domestic and external demand. The Monetary Council of the MNB in our view is to cut the base rate by yet another 10bps, resulting in a 2.5% base rate that should be, however, the bottom of the easing cycle.