UPDATE 1-Hungary central banker: good chance that inflation peaked in January

(Adds central banker's comments, background) BUDAPEST, Feb 13 (Reuters) - There is a good chance that Hungary's inflation peaked in January, but bringing down elevated prices will require patience in monetary policy, National Bank of Hungary Deputy Governor Barnabas Virag told business website napi.hu. In an interview published on Monday, Virag said the question of reducing the 13% base rate was "not on the horizon", and patience was also crucial with respect to the 18% quick deposit rate which the bank introduced last October to shore up the plunging forint currency. Virag said January headline inflation was in line with the bank's projection published in December. "There is a good chance that we have seen the peak," he said, adding that the acceleration of food inflation stopped "even though it remained very high."

Hungarian headline inflation picked up to 25.7% in January from 24.5% in December, boosted by higher household energy, food and fuel prices, and came in above market expectations for a 25.2% increase.

Inflation in Hungary is the strongest in central Europe and the central bank has the highest interest rates in the European Union after sharp hikes last year. The forint has since strengthened substantially, helped by a weaker dollar, but inflation has not released its hold. Virag said patience in policy decisions was warranted and the 13% base rate was appropriate for handling medium-term fundamental inflation risks.

"And patience is also the key word with respect to the one-day deposit launched in mid-October at an 18% rate," Virag said, reiterating that this tool was crucial for maintaining market stability in a swiftly changing global environment.

European energy prices have dropped, global inflation has started to turn around and sentiment in emerging markets has improved, but Virag said some internal factors would also need to improve before the central bank would consider changing the 18% rate.

He said hurdles to the disbursement of suspended EU funds would need to be gradually removed, and the bank would also want to see an improvement in fresh current account data.

(Reporting by Krisztina Than; Editing by Kim Coghill)

Reuters

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UPDATE 1-Hungary central banker: good chance that inflation peaked in January

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