Annual inflation in Hungary accelerated to 4.6% (chart) in June, up from 4.4% in May, in line with estimates and edged up 0.1% compared to May, the Central Statistical Office (KSH) said on July 8. The latest data are expected to bolster the National Bank's (MNB) cautious approach to monetary policy, signalling little prospect of rate cuts in the near term.

Speaking last week, MNB deputy governor Zoltan Kurali underscored the central bank’s hawkish stance, emphasising that any move towards monetary easing would require clear evidence of a more rapid and persistent decline in inflation. While price pressures have moderated, the pace of disinflation remains insufficient to justify a shift in policy, he added.

Core inflation, a key measure of underlying price pressure, eased to 4.4% from 4.8% in May, suggesting a moderate decline in inflationary momentum.

To the surprise of many analysts, food inflation picked up pace in June, rising to 6.2% year on year from 5.9% the previous month, with prices edging up 0.1% on a monthly basis. This acceleration came despite government-imposed profit margin caps on various food and non-food items, a populist measure that industry groups argue has proven counterproductive.

The margin caps are expected to remain in place until at least the end of August, but analysts increasingly believe these measures could be extended into 2026.

Fresh produce also saw significant price increases, with vegetables and fruit up nearly 10% y/y.

The monthly increase in services prices (0.6%) was lower than the 1% rise in June 2024, bringing the annual index to 5.4%. Household energy prices rose by 0.7% month on month and 8.6% y/y, reflecting higher gas usage during an unseasonably cold May, although analysts expect a notable decline in July. Fuel prices rose 0.5% from May, but were down 1% in annual terms.

Consumer good prices rose by 0.4% m/m despite the stable forint exchange rate. 

While headline inflation is expected to ease in July due to favourable base effects, analysts warn that year-end inflation is likely to remain above the MNB’s 4% upper tolerance band. Erste Bank maintains its forecast for average annual inflation at 4.7% in 2025, citing lingering risks from weather-related agricultural shocks and uncertainty over the duration of price-control measures.

Monthly inflation has stagnated between 0.0-0.2% for four consecutive months, partly due to government price interventions, but annual inflation remains structurally high, ING Bank chief analyst Peter Virovacz noted. The effects of recent pharmaceutical price cuts are expected to appear only from July. ING sees inflation temporarily falling to around 4% in the coming months, before climbing back to near 5% by year-end. It projects inflation to reach 3.9% inflation in 2026-2027.

Other analysts expect the headline CPI to average 4.5-4.7% this year and dip below the central bank’s 4% tolerance band in 2026.

The rise in food prices, driven by an increase in seasonal foods seen across Europe, was in line with its forecast, the National Economy Ministry said, adding that the government is tracking price developments closely and will take further steps to protect families and pensioners, if necessary, it added.

Despite the seemingly favourable headline figures, analysts expect the MNB to maintain its hawkish stance and keep rates on hold for a prolonged period. These expectations helped the Hungarian currency to remain steady, trading below the 399 level against the euro after the data release.