"Hungarian utilities blame rising power costs for forcing them into price hikes above this year's projected inflation, a report showed on Monday.A poll by business daily Napi Gazdasag showed utilities in Hungary's biggest towns increased prices by eight to 15 percent this year. However, there were instances of price hikes in the 40 percent range, the paper said. It also said utilities rejected earlier claims by the central bank that prices were driven by a lack of efficiency.
The paper said new power contracts negotiated after the liberalisation of the Hungarian electricity market resulted in power costs rising by up to 40 percent at water suppliers, which, they say, were a key factor governing price hikes.
The central bank, which repeatedly warned utilities not to offset inefficiency with excessive price hikes, forecast 2008 average inflation at 5 percent, down from 7.9 percent last year.
However it said higher energy prices posed an upside risk to its guidance and most economists expect it will raise its projections when it releases its quarterly update on inflation later this month.
Hungary's central bank left interest rates on hold at 7.5 percent last month. However it dropped its easing bias and for the first time in almost a year discussed a rate hike. Analysts' average 2008 inflation forecast is 5.5 percent."
Source: HVG
05.02.2008