bne IntelliNews – Hungarian inflation jumps to 13.7% y/y in July

Hungarian consumer price growth accelerated to 13.7% in July from 11.7% in June, a new high in 25 years, according to figures from the Central Statistical Office (KSH) (chart) .

July’s reading came in 0.6pp above market consensus, weakening the Hungarian forint. The HUF was already struggling earlier in the day due to oil supply concerns after Ukraine suspended Russian oil flows to southern Europe because it was not collecting fees of transit.

Soaring inflation will put more pressure on the central bank to keep raising rates. The Monetary Board of the National Bank of Hungary (MNB) raised its key rate by 100bp to 10.75% on 26 July. The base rate is now at its highest level since December 2008. London-based Capital Economics said last month that rates could rise to 13% by the end of the year.

Core inflation, which excludes the volatility of fuel and food prices, stood at 16.7%, against 13.8% the previous month, confirming strong inflationary pressure.

Analysts said inflation could rise further in the coming months due to price revisions and tax hikes, reaching 18% or even more than 20% if energy price controls, introduced in November, were lifted.

The government also brought prices of a number of staples, including pork, cooking oil and flour, back to mid-October levels from February 1 in a bid to curb inflation. .

The main driver of inflation remained food prices, which increased by 27% year-on-year.

Price growth also remained strong in other categories, with consumers paying 14% more in annual terms for consumer durables, while service charges rose 6.8% in annual terms.

“The average annual inflation rate is sure to be above 12% this year and would be [only] decline slowly in 2023. Next year’s annual average CPI also appears to be in double-digit territory and it could only land in [the central bank’s] tolerance band in 2024,” Erste said in a comment.

Laura T. Thrasher