Hungary’s inflation jumps to near nine-year high

Hungary’s inflation jumps to near nine-year high
By bne IntelliNews October 11, 2021

Hungary's inflation accelerated to an annual 5.5% in September, a near nine-year high, from 4.9% the previous month, in line with analysts’ forecasts.

On a monthly basis, prices edged up 0.2%. Core inflation rose from 3.6% in August to 4%, the highest since August 2020. Fuel prices jumped 21.6% y/y in September.

Prices of durable consumer goods increased further. On a monthly basis, the 0.9% rise translated into a 5.1% y/y reading. The last time durables' inflation was above 5% was back in 2009. Food prices grew 4.4% on an annual basis, fuelled by seasonal factors such as the increase in the price of vegetables.

The price of services increased by 3.2% y/y, which again goes against the seasonal pattern, ING Bank said in a note.

In its latest quarterly Inflation Report, the National Bank (MNB) predicted a further rise in inflation in the autumn months and put CPI over 5% for the rest of the year, but the September data exceed its latest forecast, which could further put more pressure on the central bank for a stronger tightening, analysts said.

Hungary’s central bank raised the base by 30bp at three successive meetings between June and August from 0.6% to 1.5%, but slowed the pace of monetary tightening to 15bp at the end of September.


The central bank forecasts that inflation will start to fall from the beginning of 2022, returning to the central bank's tolerance band of below 4% in Q2, stabilising at 3% in H2, which is later than expected in the previous report three months earlier. Last month MNB has revised its inflation forecast from 4.1% in 2021 to 4.6-4.7% and from 3.1% to 3.4-3.8% in 202

In a separate report, the MNB said the increase in headline inflation was broad-based, as all major groups showed stagnation or acceleration. Fuel added 1.4pp to the figure. 

The annual increase in industrial goods prices is higher than the average of previous years, reflecting the gradual pass-through of global commodity price increases into consumer prices, the MNB said.

Rising oil and food prices will continue to push inflation up in the fourth quarter, analysts said. Erste Bank expects inflation to peak at 6% in November.

Upside risks have only intensified in recent weeks due to the energy crisis in Europe and the HUF1.2 trillion (€3.4bn) transfer to be paid out by Fidesz in the coming months, including the tax rebate for families and bonus payments to pensioners.

The data and the outlook underpin the case for a continuation of the cycle of interest rate hikes, and some experts believe that the Monetary Council may need to step up the pace again in October.

ING has left its 2021 inflation forecast unchanged at 4.7% growth, and next year’s inflation could decelerate to 3.7% in 2022.