Hungarian government has to raise inflation expectations: what was to be avoided is now the best case scenario

The National Bank of Hungary (NBH) raised its inflation forecast in a quarterly report published in full on Thursday.

The central bank raised its forecast for average annual inflation in 2025 to 4.5pc-5.1pc from 3.3pc-4.1pc in the previous Inflation Report released in December. András Balatoni, an NBH director, said inflation had peaked in February and would fall back to the central bank’s 3.0pc +/-1pp tolerance band at the beginning of 2026.

He noted that rising inflation since September had reflected a global trend and pointed to the repricing of manufactured goods, food and services early in the year that was over the historical average. He added that strong price dynamics of market services could lift inflation for the full year. He said both consumer and businesses’ inflation expectations had increased.

A cap on markups of some basic foods recently rolled out by the government could shave 0.8pp off headline inflation in April and May and bring food prices under 4pc, temporarily, he said. The NBH puts 2025 GDP growth at 1.9pc-2.9pc in the fresh report.

Balatoni said growth could be supported by an expected improvement among Hungary’s trade partners as well as expanding domestic consumption driven by real wage growth and tax cuts. Big industrial capacity investments are set to be completed at the end of 2025 and in the course of 2026, he added.

Recent government tax measures are expected to leave families and pensioners with extra resources equivalent to 0.1pc of GDP in 2025, 0.5pc in 2026 and 0.7pc in 2027, Balatoni said. The impact of the measures will show up in GDP first in 2026 and 2027, he added. The NBH forecasts a current-account surplus of 1.2pc-2.6pc in 2025.

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