MNB Assesses Inflation Data for January 2024

In January 2024, inflation continued to fall at a rapid pace, the National Bank of Hungary (MNB) says in an analysis published this Friday. Consumer prices rose by 3.8% in annual terms, thus 34 months after March 2021 the price index fell back into the central bank tolerance band. Core inflation and core inflation excluding indirect tax effects fell to 6.1%.

The month-on-month, total consumer basket price was up by 0.7%, while prices rose by 0.4% regarding core inflation. The rate of price increases compared to the previous month was below the historical rate seen this time of the year primarily due to a decline in fuel prices.

Inflation was lower in January than the mean value in the December Inflation Report projection. This difference was primarily caused by the more favorable changes than expected in fuel and processed food prices. Core inflation was also slightly below our expectations while the rises in demand-sensitive items prices was in line with our earlier projection.

According to MNB, the slowdown in inflation continues to be perceived generally, fueled by the combined effect of tight monetary policy, the government’s measures to strengthen competition, subdued demand, base effects and significantly lower external cost environment than seen in recent years. The consumer price index fell by 1.7 percentage points compared to the previous month, to the greatest extent driven by fuel prices (at -0.5 percentage points), and the market services and non-durables prices (at -0.3 percentage points, each).

Year-on-year core inflation fell by 1.5 percentage points with general disinflation. MNB’s measures of underlying inflation developments capturing persistent inflationary trends, calculated on a year-on-year basis, also fell. The inflation of sticky-price products fell by 1.0 percentage point and, in turn, the annual price rise of core inflation excluding processed food prices declined by 1.5 percentage points relative to the previous month.

The continued slowdown in underlying inflation is signaled by the fact that three-month annualized core inflation and inflation were both below 3% in a shorter-term comparison. The price of the basket calculated excluding fuel and regulated product prices was up by 0.7% compared to the previous month. Month-on-month core inflation excluding processed food, which better reflect underlying developments, was 0.3% in January. In the case of tradables, the January repricing corresponded to the historical average, while it was higher for market services and slightly lower for food products, the MNB report says.