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)
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