Excellent January inflation data (with some footnotes), analysts expect a base rate cut soon

HUNGARY - In Brief 12 Feb 2026 by Istvan Racz

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The headline rate of CPI-inflation was 0.3% mom, 2.1% yoy in January, the latter sharply down from December's 3.3% yoy. Core inflation also fell, to 2.7% yoy from the previous month's 3.8% yoy, and non-fuel inflation dropped to 3.4% yoy, from 4.5% yoy in December.This sharp drop was no surprise at all, in view of a massive supportive base effect (1.5% mom inflation in January 2025). However, those analysts who have been heard about this news so far appeared to be enthusiastic about the fact that the actual yoy rate was even lower than the 2.3% yoy median of analyst expectations. On this basis, they all said that an early MNB base rate cut is likely. One analyst even said he expects a 25bps cut in February and another one of the same size in March, if everything goes well until then.We tend to think that these analyst views are correct, so that a 25-50 bps base rate reduction in one or two steps is significantly more likely to take place than not over the next two months. This is despite we are not quite the same enthusiastic about today's data as some of our colleagues. Our problem is partly an old one, so far as the current collapse of CPI-inflation is based on the combination of low global energy prices, the weak dollar, the strong forint and the administrative caps on retail margins domestically (which have just been extended until end-May, with no clear prospects on them after that date). We regard three of these four factors (the weak dollar excluded) as temporary. True, there is a fifth factor, which is substantially positive. and it is the first results of the early-year repricing actions in the services sector. Services prices rose for consumers by 0.4% mom onl...