Headline CPI Falls to +3.8% Y/Y (Est: +4.3%), Within NBH Tolerance Band

• Consumer prices rose 3.8% y/y (Est: +4.3%) in January versus +5.5% in December, according to the Central Statistical Office. Note that the central bank targets 3% inflation over the medium-term with a 1ppt tolerance band. Month-on-month, prices rose 0.7% compared to -0.3% the month prior, while the seasonally adjusted core rate fell to 6.1% from 7.6%.
• Despite the benign headline reading, the month-on-month figure represents a notable increase compared to the December figure, which suggests that base effects drove the decline in the year-on-year reading. Food prices rose 1.2% m/m, while household energy prices rose 0.9% m/m.
• The unexpected high pace of headline disinflation will increase the pressure on the National Bank of Hungary to accelerate monetary easing when they meet next on Feb 27. The central bank delivered a below-consensus 75bp rate cut last week amid growing calls of faster cuts. Nevertheless, the NBH will be wary of HUF sensitivity to a more dovish policy mix.
• Indeed, the forint has extended this week’s losses against the euro following the data. EURHUF is 0.15% in the green at typing, narrowing the gap to resistance at 390.49, the Jan 30 high. A break of this level would place the cross at its highest since October 2023. Meanwhile, PLNHUF is trading at a fresh record high, above the 90.00 handle, while USDHUF briefly reached its highest level since early November 2023.

Source: Hungarian Statistics Office