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Hungary Inflation January 2022

Hungary: Inflation jumps in January

Consumer prices jumped 1.37% in January over the previous month, following the 0.28% rise recorded in December and marking the sharpest increase in 10 years. The sharpest price increases were recorded for food, alcoholic beverages and tobacco and consumer durables.

Inflation rose from December’s 7.4% to 7.9% in January, marking the highest inflation rate since August 2007. Meanwhile, the trend pointed up, with annual average inflation coming in at 5.5% in January (December: 5.1%), the highest reading in over nine years. As a further sign of widespread inflation pressure, core inflation jumped to 7.4% in January from the previous month’s 6.4%, marking the highest print since December 2001.

Commenting on the release, Peter Virovacz, senior economist at ING, stated:

“Taking into account a possible lengthening of the fuel price cap and the incoming impact of food price caps, we see February inflation showing a decrease although it will remain above 7% YoY in our view. Considering the upside surprise in all the various inflation readings and seeing the rising price expectations of both households and corporates, we revise our previous 5.7-5.8% inflation forecast to 6.0-6.1% in 2022. Risks stemming from economic developments remain on the upside.

In light of today’s data, we expect the National Bank of Hungary’s tightening cycle to continue in the coming months. We see the effective interest rate rising to at least 5.50% in the first half of this year. As the January inflation figures are well above the base case forecasts of the central bank, we also do not rule out the possibility that a higher terminal rate is needed to reach the 3% inflation target in 2023.”

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