Hungary: Inflation comes in at highest level since July 1998 in July
August 11, 2022
Consumer prices increased 2.33% from the previous month in July, accelerating from the 1.47% rise seen in June. July's result was the highest reading since September 2006. Looking at the details of the release, prices for clothing and footwear plunged in July. In contrast, prices for food and non-alcoholic beverages rose. Meanwhile, housing and energy prices were broadly unchanged.
Inflation came in at 13.7% in July, which was up from June’s 11.7%. July's reading represented the highest inflation rate since July 1998. Meanwhile, the trend pointed up, with annual average inflation coming in at 8.5% in July (June: 7.8%). Finally, core inflation rose to 16.6% in July, from June’s 13.8%.
Commenting on the release, János Nagy, analyst at Erste Group, stated:
“In the seventh month of the year the forint reached its historically low level against the major currencies that could result in irregular repricing actions again. Furthermore, underlying processes, in addition with the new sector taxes continued to show strong second-round price pressure in the economy.”
Meanwhile, Peter Virovacz, senior economist at ING, commented on the likely repercussions on the monetary policy stance:
“As far as monetary policy is concerned, the situation remains delicate. Although a central bank typically should not react to tax increases and one-off non-core price shocks (such as changes in administered prices), this needs to be seen through a different lens in this inflationary environment. There is a major threat that inflation expectations will remain permanently high, strengthening wage-push inflation. To break such second-round effects, Hungary's central bank must respond to the recent rise in inflation. In our assessment, the National Bank of Hungary won't be able to back down from the decisive interest rate hike policy seen in the last two months.”