Hungary to phase out some of its price caps as inflation comes down -PM Orban

BUDAPEST (Reuters) - Hungary's government aims to phase out price caps on basic food and mortgage rates gradually as inflation slows, Prime Minister Viktor Orban said on Friday, without giving an exact timeline.

Orban is facing his biggest challenge since coming to power in 2010 as the economy slows sharply, with the central bank's interest rates at the highest in the European Union and annual inflation running at more than 25%.

Orban said the price caps his government introduced were "useful" in fighting inflation but were also causing market disturbances and the government was working on plans on how to phase them out.

"With respect to foodstuffs, as inflation comes down, we will phase out the existing price caps, similarly to (caps on rates on) bank loans," Orban told state radio.

"If inflation slows below a certain level, then we will have to make the decisions to give up defence mechanisms which we introduced because of high inflation."

He did not specify at what level this would happen. His government was forced to abruptly end a price cap on fuels in December amid a fuel shortage.

Hungarian inflation slowed in February for the first time since the middle of 2021, although only slightly as the headline rate was 25.4%, giving no relief yet to a central bank maintaining a hawkish policy.

National Bank of Hungary Governor Gyorgy Matolcsy has said all price caps in place, including those on some basic foods, should have been scrapped as of the beginning of the year as they have added some 3% to 4% to inflation, with the 2023 budget still compounding inflationary pressures.

(Reporting by Krisztina Than; editing by Robert Birsel)