Official: Hungarian inflation over the peak, slowing down

Consumer prices in Hungary rose by 25.4 percent in February. This increase was in line with preliminary expectations. Now, it is likely that the peak of the price rises was in January. However, a more serious fall is expected to come only in the second half of the year.

Slower inflation in Hungary

After 25.7 percent in January, the pace of price increases slowed to 25.4 percent. However, it is still very high, as the peak at the beginning of the year was a record not seen for almost 27 years. Core inflation stood at 25.2 percent, while the consumer price index for pensioners stood at 26.9 percent, Portfolio reports.

Analysts polled by Portfolio had expected an average of just 25.4 percent. This means that they were right on target for February. The experts believe that inflation could remain high in the coming months, with rates consistently above 20 percent until the middle of the year. Then, in the second half of the year, the adjustment of the economy and the high base could lead to a more severe decline. With this, there is a good chance of bringing the inflation rate below 10 percent by December.

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What is the reason for the slower inflation?

The slight moderation in inflation is partly explained by disinflation in food prices. On a monthly basis though, food prices have still risen by 1.7 percent, so food prices are still creeping upwards, just not at the same pace as this time a year ago. The other drag was household energy. As consumption was favourable (mainly due to the mild weather), the statistical office calculated a price fall here too. 

The fall in inflation has also been helped by the evolution of fuel prices. This time last year, the base was rising, while prices at the petrol stations have now fallen slightly.

And what strengthened inflation?

Inflation was dragged up by higher prices for spirits and tobacco products due to tax effects. Price increases in services also remained strong in February. For the time being, the impact of the forint appreciation is not visible in the high import share of consumer durables, as the KSH still registered a minimal increase in prices on a monthly basis.

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What increased the most?

According to data published by the Hungarian Central Statistical Office (KSH) on Wednesday, the biggest increase in a year was in the price of household energy, up 49 percent. However, here too, the rate of increase has slowed, as in recent months, it has been well over 50 percent. Food prices rose 43.3 percent from February last year. It is also a slowdown from 44 percent in January. However, on a monthly basis, products still became more expensive.

Prices of other goods and fuels increased at a near average rate due to the abolition of the price freeze in December. On a monthly basis, the most significant price increases were now for spirits and tobacco.

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Source: Portfolio.hu