Inflation has dropped to its lowest level in eight years. The latest figures released by the Hungarian Central Statistical Office (KSH) show that consumer prices increased by 2.1 percent year-on-year in January, easing from 3.3 percent in December, while rising 0.3 percent compared to the previous month.
This marks the lowest inflation rate recorded in Hungary since March 2018. Core inflation declined to 2.7 percent, falling below the central bank’s target. Economists had forecast 2.3 percent annual inflation and a 0.6 percent monthly rise, making the actual data a mild upside surprise.
Inflation dynamics were at their peak at the beginning of last year, exceeding 5 percent. In response, the government introduced profit margin caps, although their impact only started to appear in the data after March. As a result, the current lower rate is partly due to the high base from last year. At the same time, the margin caps themselves have played a meaningful role, reducing inflation by around 1.5 percentage points on their own.
In addition, global food prices — including sugar and milk — have been declining for months, while the forint has remained relatively strong. Together, these factors have led to a steady easing of imported inflation.
In detail, food prices increased by 1.3 percent year-on-year, while food inflation excluding catering services fell by 2 percent. Several staple products became significantly cheaper: the price of margarine fell by 29.4 percent, canned meat by 24.9 percent, lard by 22.1 percent, milk by 18.1 percent, butter and butter cream by 17.2 percent, and flour by 14.8 percent.
Annual inflation in services slowed to 5.0 percent from 6.8 percent in December. Household energy prices rose by 6.2 percent (with piped gas up 12.8 percent), while motor fuel prices fell by 12.3 percent. Durable goods prices increased by 2.9 percent.
Inflation in Hungary (2024-January 2026). Source: MTI/KSH
The favorable data has once again put interest rate cuts on the agenda. The Monetary Council of the central bank (MNB) will hold its rate-setting meeting on February 24, where, after a year and a half pause, the door may reopen to monetary easing. Markets are pricing in a total of 100 basis points of rate cuts this year, with the first step possibly coming as early as February, although analysts remain divided on whether the central bank will wait for the March inflation report.
Responding to the data, the Ministry for National Economy announced that
the profit margin reduction measure will be extended until the end of May.
According to the ministry, the measure has made a meaningful contribution to curbing inflation, and the government will continue to act against unjustified price increases.
Via MTI, Világgazdaság; Featured image: MTI/Balogh Zoltán
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