Hungary inflation hits two-year high as taxes up in January

Hungary's inflation hit a two-year high of 6.6 percent year-on-year in January, boosted by tax increases and state-imposed price rises.
The figure, released by the Central Statistics Office (KSH) on Tuesday, compared with 5.7 percent in December and was well above the consensus forecast of 6.25 percent in a recent Reuters survey.
But analysts said it was unlikely to trigger a central bank (NBH) interest rate hike as inflation was expected to rise to above seven percent early this year anyway.
"We think the central bank will keep interest rates unchanged (at 12.5 percent) in the first two quarters of the year," said Lars Christensen of Danske Bank in Copenhagen.
The CPI showed a 2.1 percent rise in prices from December.
"Almost half the monthly rise was caused by VAT (value-added tax) and excise tax changes," the KSH said.
Core inflation was 1.1 percent month-on-month and 5.9 percent year-on-year in January, compared with 0.4 percent and 4.9 percent respectively in December.
A KSH official said the January spike in the index did not include all energy price rises, as part of them would appear in bills in the coming months.
The bigger part of the rise was caused by higher drug prices due to cuts in state subsidies, and the introduction of five percent VAT on many medicines, the official said.
Analysts said some of the forecast rise in inflation had come earlier than expected, and could have a mildly negative impact on markets.