WOOD Flash – Hungary macro: CPI release supports easing ahead

On Monday (12 January), MNB Governor Varga struck a balanced, but mildly dovish tone in his comments to the press. He emphasised that the future path of interest rates remains fully data-dependent, with the December 2025 CPI release described as “decisive” for near-term assessments. He also stressed the close monitoring of the December 2025 and January 2026 inflation dynamics, and noted the potential for inflation to reach the 3% target early in 2026E in a sustainable manner, beyond simple tolerance-band compliance. At the same time, he reaffirmed the Central Bank’s commitment to HUF stability in the context of any easing. The latest inflation release supports this view, with the CPI slowing to 3.3% yoy in December (in line with the consensus expectations of 3.2-3.3%), down from 3.8% in November and the lowest since October 2024. In our view, this tilts the balance toward a potential 25bps rate cut at an upcoming meeting – more likely in February than January, given the services inflation surprise – provided that there is no meaningful rebound in the January repricing. This remains broadly consistent with our baseline of an initial easing in early spring 2026E, with the risks still skewed modestly to the upside, from wages, housing pressures, and HUF sensitivity, ahead of the elections. In terms of the elections, the short-term macro impact of this cut – regardless of whether it emerges in January or February – would be negligible for households; however, from a narrative perspective, the start of monetary easing would be marginally positive for Fidesz.