Hungarian inflation surges to almost 15-year high

Bloomberg

Hungarian inflation surged to an almost 15-year high as government-imposed price caps on goods ranging from sugar to gasoline failed to rein in price growth.
Consumer prices grew an annual 7.9% in January, the fastest pace since August 2007 and exceeding the 7.4% median estimate in a Bloomberg survey, the Budapest-based statistics office said in a statement. The core inflation rate, which strips out volatile energy and food prices, rose to 7.4%, the highest in 20 years.
The inflation data keeps pressure on Hungary’s central bank to continue its monetary-tightening cycle. Policy makers raised the effective interest rate by 250 basis points to 4.3% since mid-November in a flurry of weekly hikes but signalled last month that they planned to slow the pace of monetary tightening.
“We expect the effective interest rate to be hiked to at least 5.5% in the first half of this year but in light of today’s data, the central bank may well have to tighten policy even more,” Peter Virovacz, an economist at ING Bank in Budapest, said in a report.
The forint strengthened 0.1% to 353.89 per euro in early trading on Friday. The currency rose 4.2% year-to-date, the best performance among the emerging-market
currencies in Europe.
Spiralling prices have also become a topic ahead of the April 3 general elections, which are the most closely contested in more than a decade.
Prime Minister Viktor Orban, whose pre-election spending including family tax rebates and wage and pension hikes may have contributed to price hikes, capped the cost of some staple food items last month to address voter concerns about inflation. He’d previously limited fuel and household energy costs and froze mortgage rates.
The government expects the price caps to eventually shave as much as 2.5 percentage points off of headline inflation.