Hungary\u2019s inflation rate fell to 2.1% year-on-year in January 2026, according to the Hungarian Central Statistical Office. This was below the National Bank of Hungary\u2019s 3% target and below market consensus.<\/p>\n
Core inflation, which excludes volatile items, dropped to 2.7% year-on-year. This was the first time since January 2019 that both headline and core inflation were below 3%.<\/p>\n
The data were linked to government price shield measures, a strong forint, and delayed tax and excise duty rises. The price shield measures were extended again by three months.<\/p>\n
A February inflation rate of about 1.5% was forecast in the text. If low readings persist, the expected rise in inflation may be pushed back to later in 2026.<\/p>\n
Average inflation for 2026 was described as increasingly likely to be around 3%, compared with a prior 3.3% forecast. The text also stated that 25bp base rate cuts in both February and March were possible, unless a geopolitical event weakens the forint.<\/p>\n
The latest inflation data for January has come in significantly lower than expected at 2.1% year-on-year. With core inflation also dropping to 2.7%, both key metrics are now firmly below the central bank’s 3% target for the first time since early 2019. This reinforces our view that the disinflationary trend is solidifying, creating a clear path for policy changes.<\/p>\n
This surprisingly low print strengthens the case for the National Bank of Hungary (NBH) to continue its easing cycle. We now see a very high probability of 25 basis point cuts at both the February and March meetings, especially with inflation forecast to dip toward 1.5% next month. This aligns with the forward markets, which have been pricing in a more dovish stance from the central bank for several weeks.<\/p>\n
For interest rate traders, this suggests positioning to receive fixed rates on short-term swaps, anticipating that the entire front end of the yield curve will shift lower. Forward Rate Agreements (FRAs) for the coming months also look attractive, as they directly capture the expected policy rate reductions. Looking back at the easing cycle that began in 2023, we saw how quickly the front-end of the curve could re-price on dovish surprises.<\/p>\n
While rate cuts are typically negative for a currency, the Forint has shown resilience, partly due to Hungary\u2019s improving external balance we observed throughout 2025. However, with the interest rate differential versus the Eurozone set to narrow further, traders should consider buying EUR\/HUF call options. This strategy offers upside exposure to a weaker Forint while limiting downside risk if the currency remains unexpectedly strong.<\/p>\n
This policy path is also supported by the broader economic context, as Q4 2025 GDP figures showed growth remains fragile at just 0.9%. The government\u2019s extension of price shields on certain goods, while artificial, further suppresses short-term inflation prints. This gives the NBH more room to maneuver, much like we saw during the initial phase of its easing cycle back in 2024 when the base rate was systematically lowered from its 13% peak.<\/p>\n
The main risk to this dovish outlook remains a sudden spike in geopolitical tensions, which historically impacts the Forint significantly due to its status as a regional currency. Any escalation in the conflict in Ukraine, for example, could trigger a rapid flight to safety and force the central bank to pause its rate cuts. Therefore, monitoring measures of implied volatility on the Forint is crucial.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Hungary\u2019s January 2026 inflation hit 2.1% and core 2.7%, below target; rate cuts possible amid strong forint.<\/p>\n","protected":false},"author":62,"featured_media":17026,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41740","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41740","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=41740"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41740\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17026"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=41740"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=41740"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=41740"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}