Consumer prices in Hungary rose by an annual 2.1%, down from 3.3% in December, below forecasts and the lowest since March 2018, while prices increased by 0.3% month-on-month,  according to monthly data from the Central Statistics Office (KSH). The data reinforces the view that the National Bank (MNB) will resume monetary easing at the February meeting after 18 months.

Core inflation fell from 3.5% to 2.7%, below the central bank’s target 3% and the lowest level since January 2019.

Analysts had expected annual inflation of 2.3% and monthly price growth of 0.6%, making the latest figure a major surprise. The 0.3% monthly increase was significantly lower than the historically typical January repricing.

January data are seen as particularly important, as many companies adjust prices at the start of the year, influencing inflation trends for the months ahead.

Disinflation was supported by base effects and a string of government-imposed measures. These include profit margin caps and voluntary price restrictions by telcos and banks, based on a mid-2025 agreement with the government and a six-month period. The delay of inflation-linked hikes in excise taxes and the strong forint also helped curb imported inflation.

After the reading, the Economy Ministry announced the extension of the profit margin caps until the end of May, or after the elections. The ministry said the regulation, which caps retail prices at 10% above procurement costs for hundreds of basic food items, helped moderate food inflation.

Food prices rose by 1.3% year-on-year (y/y), at their lowest pace since January 2017, while the index excluding catering services fell by 2.0%. Prices of several staple products, including dairy items, flour and margarine, declined significantly. Services inflation eased to 5.0% from 6.8% in December, and consumer durable prices rose 2.9% y/y in January, while fuel prices dropped by 12.3%, and household energy prices increased by 6.2% in the same period.

While analysts queried by financial website Portfolio.hu were mixed on whether the first rate cut could come in March, following the release of the updated Inflation Report, most of them said the current data could open the door to a rate cut as early as February.

Markets are pricing in a total of 100 basis points of easing this year.

ING Bank analyst Peter Virovacz said that price-setting dynamics slowed across almost all major categories, and food prices rose moderately in January, in line with global trends. Inflation could decline to 1.5% in February and remain subdued in the months ahead, helped by the extension of the profit markups and the strong profit. The modest inflation at the start of the year could also bring household inflation expectations down, which the MNB often cites as persistently elevated and a key upside risk to the inflation outlook.

As a result, ING argues, the anticipated inflation rebound may be pushed further back in 2026, increasing the likelihood that average annual inflation will settle around 3%.

ING expects the MNB to make the first rate cut in February, followed by another 25bp easing in March, barring a major geopolitical shock.

Analysts at government-funded think-tank MGFU said that inflation could hover between the 2-4% tolerance band of MNB for 2026 and average 3%

Erste Bank analyst Janos Nagy highlighted upside risks from the demand side, including strong real wage growth, a double-digit increase in the minimum wage, and other pre-election measures that boost disposable income. The potential phase-out of the profit margin caps could lead to a moderate upward swing in the index, he warned.

The EUR/HUF moved up swiftly from 379.5 to over 381 after the release of data on expections that an imminent rate cut would lower real interest rates on Hungarian assets. Still, the forint is up 6% against the euro in the last 12 months.