However, the cut in VAT on some foods and services will help to contain the January inflation rise, and the negative base effect from energy prices should fade by March, allowing inflation to stabilize just below 3%, JP Morgan’s analysts said. Analysts at Goldman Sachs in London said they expect headline inflation to rise to 2.1%.

“On our estimates, non-core inflation remains the main driver behind the higher print in January. In December, the rise from 1.1% to 1.8% was entirely driven by non-core factors, with motor fuels and oils inflation rising from 0.6% to 6.8%, and the uptick in food price inflation from 0.7% to 1.3%”.

“We expect headline inflation to remain below the (central bank’s) 3% inflation target for the duration of this year”. In 2017 as a whole, “we expect headline inflation to average 2.0%.” Analysts at Morgan Stanley said they expect January CPI to have accelerated to 2.3%.

“If our forecast is correct, we think that the first quarter CPI average would be 2.8%, well above the NBH’s 2.2% projection ... If the data validate our view that the NBH’s inflation view is too benign, the question of tightening or at the very least removing the easing bias would inevitably arise”, they added.

Republished with permission of Hungary Matters, MTI’s daily newsletter.