Hungarian inflation falls to two-year low in January as energy prices fall

Food inflation slowed down remarkably while energy became cheaper than last year.

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Inflation in Hungary sharply declined to 3.8% in January compared to the previous year, according to the Hungarian Statistical Office. In December, prices rose by 5.5% in a yearly comparison.

The lower-than-expected headline inflation (including food and energy prices) had hit its lowest level since March 2021. The figure was partially dragged down by slowing food inflation, which was 3.6% in January (vs 4.8% in December 2023). Subdued food prices were good news for the people who had seen food prices going up by 44% at the beginning of the last year.

Energy was cheaper than last year, prices decreased for electricity, gas, and other fuels by 11.3% in January.

Overall consumer prices rose by 0.7% in January in a monthly comparison, rebounding from a 0.3% fall in December.

The latest inflation data seems to confirm the Hungarian Central Bank’s (MNB) monetary policy path, in which it has started cutting rates.

The annual core inflation, which excludes food and energy prices, is determinedly marching towards the MNB’s goals and gradually decreasing. In January, the rate was at a 26-month low, 6.1%, from 7.6% in December 2023.

The Hungarian National Bank (MNB) said that “34 months after March 2021 the price index fell back into the central bank tolerance band” in its flash report after the figures were released. 

The MNB put the slowdown in inflation down to the combined effect of tight monetary policy and subdued demand, as well as base effects and a lower external cost environment.

Due to this environment, the MNB kept the benchmark rate for the bigger part of last year at a very high level, 13%, before started cutting in each month since November 2023, lowering it to 10% at its latest Monetary Policy Meeting in January 2024.

Prices in Hungary rose at one of the highest paces in the EU in 2022-2023, and annual inflation during the first six months of last year was constantly above 20%.