In its Inflation Report, the central bank acknowledged a combination of disciplined monetary policy, government measures to spur competition, subdued domestic demand, and a lower external cost environment for the drop in the Consumer Price Index from a peak of 25.7% in January.

The MNB said "robust" disinflation would continue in Q1 2024 before decelerating. It put average annual inflation at 17.6-17.7% for 2023 and 4-5.5% for 2024.

Presenting the report, András Balatoni, an MNB director, said disinflation would slow from Q2 2024 on the back of tax measures and the end of base effects. He added that inflation is expected to return to the MNB's 2-4% tolerance band in 2025. He said a gradual pickup in domestic demand could support an acceleration of broader-based economic growth from 2024.

Falling inflation, growing real wages, a gradual recovery of confidence and an expected pickup in lending could help that trend, he noted.

Balatoni argued that, despite the economic downturn, Hungary's labor market had remained stable and at close to full employment. The jobless rate is expected to fall, he added.