bne IntelliNews – Hungarian consumer prices rose slightly in March to their highest level in 15 years

Annual consumer price growth accelerated to a 15-year high of 8.5% in March, from 8.3% in February, despite price freezes for some sample staples and fuel, the Central Bureau of Statistics (KSH) said on April 8. The figures were in line with forecasts. Without government intervention, headline inflation would have been 3 to 4 percentage points higher last month, analysts said.

On a monthly basis, prices increased by 1%.

Core inflation, which excludes fuel and food price volatility, rose 1pp to 9.1%, reflecting strong underlying inflationary pressures in the economy.

In its monthly report, the National Bank (MNB) attributed the rise to a recovery in the prices of the three product groups: processed foods, industrial goods and services. Fuel prices contributed 1.2 pp to headline inflation, according to the analysis.

Price changes reached double-digit territory in 40% of the consumer basket. The breakdown of categories in the KSH data shows that food prices jumped 13% year-on-year in March. Poultry and bread prices increased by 21.4% and 27.9% respectively. Durable consumer goods increased by 9.5% and prices for services increased by 6%.

The National Bank (MNB) had said in its latest quarterly inflation report, published at the end of March, that the CPI would probably only start to fall in the second half of the year, noting that the short-term path of inflation would depend ” the duration of the war, the extent and persistence of sanctions, and government responses”.

It raised its average annual inflation forecast for 2022 to 7.5-9.8% in the new report from 4.7-5.1% in December, citing supply-side effects and shocks in prices due to the rise in the prices of raw materials and energy.

Headline inflation is expected to average 3.3-5.0% in 2023, before reaching the 3% target in 2024. The MNB sees core inflation increasing to 7.9-9, 4% in 2022 before dropping to 3.7 to 5.1% in 2023 and to 2.7 to 3.3%. in 2024.

The dynamic pace of food price growth shows that even price caps on cooking oil, milk and other commodities are being offset by rising prices for other food items, K&H Bank said.

The inflationary path will depend on how long the artificially set prices remain in place. At an international press conference, Prime Minister Viktor Orban noted that the government would seek to extend the mandate of the price cap. Second-round effects from rising commodity and energy prices will keep inflationary pressures high, Takarekbank analyst Gergely Suppan said.

On top of that, there is strong wage pressure as the labor market remains tight, which could trigger further monetary tightening from the MNB. Erste Bank sees the headline inflation rate returning to the central bank’s 4% tolerance range next year and the 3% target being met a year later.

Laura T. Thrasher