Consumer prices rose 0.4% from January to February according to the statistics office. According to KSH, the last time the rate of inflation was as low as 3.2% in Hungary was in June 1981.

“In line with the expectations of the National Bank of Hungary, the rate of inflation falls rapidly,” National Bank Spokesman Gábor Missura said, commenting the KSH figures. He added that inflation follows the path the central bank outlined in its Feb. 21 report.

A strong Hungarian forint, intensifying competition as a result of Hungary’s EU membership, and favorable international trends will contribute to a falling rate of inflation, but the fall will not continue in the second half of the year, Missura added.

Orsolya Nyeste, an analyst at Erste Bank, said it is surprising that the February inflation figure ended up lower than the most optimistic forecast, and added that 3.5% year-on-year inflation can be expected in the remaining part of 2005.
London-based analysts expect that the better than expected inflation figures could encourage the Hungarian National Bank to cut its prime rate by 75 basis points in March, following a similar-sized cut in February.