bne IntelliNews – Hungarian inflation reaches 20.1%
Headline inflation in Hungary rose to 21.1% in October from 20.1% the previous month, a 26-year high, according to statistics office KSH.
Core inflation, which excludes volatility in fuel and food prices, rose from 20.7% in September to 22.3% year-on-year, slightly above estimates.
On a monthly basis, consumer prices rose 2% due to soaring food and energy prices.
Inflation in the January-October period increased by 12.7% year-on-year. The Hungarian National Bank (MNB) had said the October CPI “could surprise” on the upside.
Food inflation hit a record 40% in October. Among foodstuffs, the price of eggs has increased by 88% in the last 12 months. Bread, milk and butter cost 71-75% more than a year ago.
The Hungarian government announced a cap on egg and potato prices on 9 November (link). The measure would reduce the price of eggs by around 25% and the price of potatoes by around 10%, reducing headline inflation by 0.1 to 0.2 pp, Chief of Staff Gergely Gulyas said during the the weekly press conference.
Analysts said the weak forint, one-off taxes on retailers and the negative impact of the food price cap were the main drivers behind the sustained growth in food prices in Hungary, which rose among the fastest in the world. EU. Retailers spread the losses on food products whose prices are capped by raising the price of other products. The measure has also led to the shortage of flour or sugar in stores, two of the half a dozen foodstuffs under the current price ceiling.
Energy prices also soared as the government overhauled its regulated utility price system over the summer, and the first higher bills arrived in September. Household energy prices rose 64.4%, with gas prices jumping 121.0% and electricity prices 28.6% year-on-year.
The data shows that the prices of durable consumer goods and services increased by 14.9% and 8.3% respectively on an annual basis. Prices for the category of goods that includes vehicle fuel rose 11.1%.
In a separate report, the MNB said food prices contributed 1.2 pp to the rise in headline inflation in October, while fuel prices reduced the rise by 0. 5 pp due to base effects.
Household inflation expectations showed “unusually high volatility” and continued to rise from the previous month, he added.
“We expect annual inflation to remain above 20% in the coming months and start to slow from the second quarter of 2023, as supply-side price pressures ease and partly from a significant moderation in demand,” Erste Bank said in a note, adding that inflation could return to single-digit territory in the third quarter of 2023.
Other analysts see inflation peaking at 22-23% in early 2023.
Rising energy costs and food prices will push Hungary’s CPI to 14% in 2022 from 5.1% in 2021, Magyar Bankholding said, adding that inflation next year will be close to 2022 levels.
The MNB said earlier that it expected the overall figure to return to its tolerance margin of 4% in 2024.