Spirits and tobacco prices increased by 8.9%, including a 12.7% rise in the price of tobacco products.

Prices in the category of goods that includes vehicle fuel grew by 11.7% as vehicle fuel prices jumped 25.9%. Food prices increased by 8% and consumer durable prices were up 7.5%. Core inflation, which excludes volatile fuel and food prices, was 6.4%.

CPI calculated with a basket of goods and services used by pensioners was 6.7%. Month on month, inflation was 0.3%. Average annual inflation was 5.1% in 2021, while adjusted for a better comparison with other European Union member states, the figure was 5.2%.

The central bank noted in response to the data release that inflation remained unchanged from the previous month in December, putting Hungary among European countries which saw the acceleration of inflation halt by the end of the year.

Core inflation and core inflation excluding the effects of indirect taxes grew by 1.1 percentage point to 6.4%. This increase was counterbalanced by more moderate inflation in the price of fuel, alcohol and tobacco, it added.

Commenting on the data, analysts said that inflation grew on the back of the “surprisingly steep” rise in food prices.

K and H lead analyst Dávid Németh said inflation was expected to slow within 6-12 months. Annual inflation is expected around 5.5%, with the December data possibly falling below 4%, he said.

Government measures such as price caps on basic foods and on fuel would reduce inflation, he said, but uncertainties regarding the duration of the fuel price cap make the extent of that effect unpredictable, he said.

Péter Virovácz of ING Bank said the price cap was expected to reduce inflation by 0.1-0.2 percentage points. Meanwhile, January is expected to see even steeper price rises before the price caps are introduced, he said.

ING is calculating with 5.6-5.7% inflation in 2022, he said. ING also expects the central bank will further hike interest rates in the coming months. By how much will depend on the January data, he said.

Takarékbank’s Gergely Suppan said the 6.4% core inflation, an “unexpectedly steep jump”, was due to rocketing food prices. Inflation is expected to slow in the coming months, although international trends will keep it higher than expected earlier, he said. Further risks include the wage hikes, rising wage costs and growing consumption, he said. Takarékbank is raising its inflation forecast to 5.5% for 2022, he said.

Gábor Regős of Századvég Gazdaságkutató highlighted the importance of the January inflation data, which will show retail price rises and have a bearing on monetary policy in the coming year. Századvég expects inflation to be above 5% in 2022, he said.

Wage hikes will drive an uptick in retail turnover, he said. Normalising markets, the easing of supply difficulties and a stringent monetary policy would curb inflation, he said.

János Nagy of Erste Bank said the price caps on basic foods would curb flyaway prices in the sector but do little to slow inflation, which is expected to reach the target by 2023 the earliest. Several sectors have forecast a 10-20% price hike in 2022, he said.

The expansive fiscal policy planned for the year is also a risk regarding prices, he said. The inflation rate in 2022 is expected to surpass 5%, he said.