Hungary’s inflation fell to 3.8% in January over the previous year, according to the latest data published by the Hungarian Statistical Office.

In December, prices increased by 5.5%.

The lower-than-forecast headline inflation had fallen to its lowest point since March 2021, in part weighed down by a food inflation slowdown, which stood at 3.6% in January, compared to 4.8% in December.

Furthermore, energy prices had declined over last year, with electricity, gas and other fuels falling by 11.3% last month.

Consumer prices rose by 0.7% overall in January month-on-month, rallying from a 0.3% drop in December, Euro News reports.

The country’s latest inflation data appears to confirm the central bank’s monetary policy trajectory, in which it has started slashing rates.

In addition, annual core inflation, excluding food and energy prices, is progressively declining. Last month, the figure fell to a 26-month low of 6.1%, compared to 7.6% in December 2023.

Within its flash report following the release of the figures, the Hungarian National Bank (MNB) stated: “34 months after March 2021, the price index fell back into the central bank tolerance band.”

The MNB attributed the inflation slowdown to the joint impact of tight monetary policy and subdued demand, along with base effects and a lower external cost environment.

As such, the central bank held the benchmark rate for the majority of 2023 at the elevated 13% level before starting to ease each month since November 2023. The rate was reduced to 10% at the bank’s latest Monetary Policy Meeting last month.

Moreover, prices in Hungary increased at one of the highest paces in the European Union in 2022/23, whilst annual inflation during the first six months of 2023 constantly remained above 20%.