Lessening pressure? Inflation in Hungary is at an 8-year low

Hungary’s inflation rate has fallen to its lowest level in nearly eight years, strengthening expectations that the central bank may soon begin cutting interest rates.

Inflation is the lowest since 2018

Fresh data released by the Hungarian Central Statistical Office (Központi Statisztikai Hivatal, KSH) show that consumer prices in January were 2.1% higher than a year earlier, down sharply from 3.3% in December and comfortably within the Hungarian National Bank’s 2–4% target range.

As HVG writes, the latest figure marks the lowest annual inflation reading since March 2018 and came in below analysts’ expectations. On a monthly basis, prices rose by just 0.3%, while core inflation also eased, dropping from 3.5% to 2.7%.

Several factors contributed to the slowdown. Fuel prices played a particularly significant role: petrol is now more than 12% cheaper than a year ago after steep declines in global oil markets last spring. Government measures, including profit margin caps on certain food products, also helped contain price increases. Meanwhile, favourable global trends — especially falling energy and food commodity prices — have reduced cost pressures.

Food prices overall were only 1.3% higher than a year earlier, and supermarket prices for many staples actually fell. Items such as milk, dairy products, butter, flour and margarine have seen notable price declines over the past 12 months. However, some categories continued to rise sharply, including fresh fruit, chocolate and beef. Eating out remains significantly more expensive, with restaurant and catering prices up nearly 9%.

Elsewhere, household energy costs increased by 6.2% year on year, although monthly data show some easing due to lower gas prices. Service sector inflation remained relatively elevated at around 5%, reflecting ongoing wage growth and strong domestic demand. Alcohol and tobacco prices also rose by more than 6%.

What do experts say?

Economists say the sharp decline in inflation has been driven partly by so-called base effects, as last year’s early-year price spikes have dropped out of annual comparisons. Government interventions and the strengthening forint have also played a role.

Despite the encouraging headline figure, analysts warn that underlying inflationary pressures remain. Strong real wage growth, including substantial minimum wage increases, and government spending measures are boosting household incomes and could fuel renewed price rises later in the year. Many forecasts suggest inflation may climb back above 4% in the second half of 2026 if temporary factors fade.