Strong disinflation in October

131112_CPI_ENFuel prices played a leading role in disinflation, attaining 4.7% monthly drop. Meanwhile most other prices increased, including food prices that were up by 0.1% month-on-month.

Core inflation was 0.1% month-on-month and 3.4% year-on-year, down from 0.8% and 3.5% in September, respectively. Hence, underlying inflationary dynamics are still significantly faster than headline inflation suggests. Yet, the MNB is likely to cut further its base rate, currently standing at 3.4%. By the year-end, we expect a base rate of 3-3.2%. Annual average inflation in 2013 is forecasted at 1.8%, accounting on a mild acceleration of inflation in November-December.