Low headline CPI, high core inflation

131211_Infláció_ENNovember inflation data brought about no major alteration of the general picture of extremely low headline CPI coupled with rather high core inflation in a European comparison. Annual inflation stayed at 0.9%, the same as in October, whereas month-on-month CPI attained -0,1%, up from -0.3% in the previous month. Importantly, though, core inflation attained 0.4% m-o-m and 3.5% y-o-y, up from 0.2% and 3.4% in October, respectively. Hence, core inflation has been essentially accelerating since the 2.8% y-o-y low in June, signifying potential rise in the headline index once food and energy prices start increasing.

In November, regular prices were sliding down again as a result of yet another 10% cut in electricity and gas prices but most of this will impact December and January headline figures. Consequently, low inflationary dynamics will characterise the forthcoming months, as long as headline figures are concerned. In annual average, we continue to forecast 1.8% CPI in 2013 and 2.3% in 2014. We expect the MNB to cut its base rate by yet another 10bps in December.