CEE ECONOMY-Hungary's Jan CPI accelerates to 25.7% y/y, decline to be 'painfully slow'

By Krisztina Than BUDAPEST, Feb 10 (Reuters) - Hungarian headline inflation rose to a higher-than-expected annual 25.7% in January from 24.5% in December, signalling persistent strong price pressures in an economy where the labour market remains tight. Inflation in Hungary is the strongest in central Europe and the central bank has the highest interest rates in the European Union after sharp rate hikes last year, in part to shift the forint off record lows. The forint has since strengthened substantially, helped by a weaker dollar, but inflation has not released its hold. Average inflation last year rose to 14.5%, the highest in 25 years, and the central bank's outlook in December showed it could be even higher this year, with annual inflation slowing more significantly only from mid-2023 onwards. January headline inflation came in above market expectations for a 25.2% increase. Retail sales data earlier this month showed inflation has eroded purchasing power, with Hungarians slamming the brakes on their purchases in December. Like other policymakers in central Europe, Hungarian rate setters are seeking to keep rate the policy stable for now as the economy slows sharply. The central bank is due to publish fresh inflation projections in March. Peter Virovacz, an analyst at ING, said the January figures were likely the peak in inflation, and price growth could start slowing from February but it would be "painfully slow". "This data should not change the central bank's stance: they will keep a wait-and-see attitude and I don't expect a marked change in policy in the first quarter and I am not even sure they will start preparing a change in policy," he said. "The only silver lining in this data is that January could have been the peak..." Core inflation , calculated with a revised methodology, accelerated to 25.4% from 24.8% in December, also exceeding analysts' 25.0% forecast in a Reuters survey. Prices increased by 2.3% from the previous month, the KSH said. Food prices rose by 44% year-on-year, household energy prices jumped by 52.4%, while fuel prices rose by 35.9% after a supply shortage forced the government to abandon year-long price cap in early December. (Reporting by Krisztina Than; editing by Philippa Fletcher)