Bloomberg News

Hungary Inflation Slows More Than Forecast on Tax Effect

February 14, 2013

Hungary’s inflation rate dropped more than forecast to the lowest in 16 months in January as value-added tax increases from a year ago faded from the index, adding to arguments to keep cutting borrowing costs.

The inflation rate was 3.7 percent in January, the lowest since September 2011, the Budapest-based statistics office said today. The median estimate of 18 economists in a Bloomberg survey was 3.9 percent. Prices rose 0.8 percent from December.

Outgoing central bank President Andras Simor has been outvoted along with his two deputies on rate cuts by non- executive members who want to spur an economy battling its second recession in four years and who forecast meeting policy makers’ 3 percent inflation target in the medium-term. The bank on Jan. 29 lowered the two-week deposit rate by a quarter-point for a sixth month to 5.5 percent, the lowest since 2010.

The drop in the January inflation index was primarily caused by the high base from a year ago due to value-added tax increases, statistician Borbala Minary told reporters today. The effects of a 10 percent cut in household energy prices from Jan. 1 will show up in the inflation rate next month, she said.

To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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