Hungary inflation jumps to over 20% in September
Prices continued to rise substantially in almost all areas in September, with the inflation rate jumping to 20.1% yr/yr from 15.6% in the previous month. The last time a higher rate was recorded was in October 1996, i.e. CPI rose to a 26-year high. Meanwhile, core inflation rose to 20.7% from 19% in Aug.
The central bank (MNB) had previously said that they expected inflation to be somewhere around twenty percent, the question was whether it would be slightly below or above that. Accordingly, analysts were not surprised by the data.
Household energy is primarily responsible for the leap, as the rise in overheads has just been included in the stats office's inflation calculating methodology. The government introduced the higher tariffs for the part above average consumption from the beginning of August, but the statistics only include this when the first higher bills were received by consumers, which was in September. It is therefore not surprising that the cost of household energy has jumped by almost 60% in one month and by more than 62% in a year. Within energy, the price of piped gas rose by 121% and electricity by 28.9%. The price of bottled gas increased by 45.0% and firewood by 43.8%.
In addition, the rise in food prices continues to be the main reason for Hungary's runaway inflation, with the increase in this product group already exceeding 35% in September. In addition, the monthly inflation rate of 3.5% is still considered to be very high. Within food products, the sharpest price increases were observed at bread (+76.2%), cheese (+68%), dairy products, butter and dairy spreads (+66.3%), margarine (+61.2%), dry pasta (+60.2%) and eggs (+53.7%). The price of pork meat rose by 22.4%, chocolate and cocoa by 19.1%, sugar by 10.9% and edible oil by 5%, below the average, the KSH said.
In one month, the price of school meals went up 13.5%, that of eggs by 9.8%, while butter and dairy spreads cost 8.3% more, bread and dairy products 7.6% more, milk 5.2% more, seasonal food (potatoes, fresh vegetables, fresh home and tropical fruit) 4.7% more and chocolate and cocoa 0.5% less, according to the statistics office.
The inflation data just released, while not a surprise, may pose a further challenge for the central bank.
The MNB announced two weeks ago that it would end its almost 18-month cycle of interest rate hikes, and the 4.5 percentage point jump in inflation does not bode well in this context.
After its latest policy meeting in late September, the central bank stressed that inflation is expected to rise further in the coming months, but that this is due to factors outside the control of monetary policy, such as rising utility costs and a surge in food prices due to the drought.
The path of inflation in the coming period may also be challenging, as the weakening of the forint has picked up again in recent weeks, which could put further upward pressure on prices in the next few months. Moreover, the special taxes announced by the government in the summer point to a similar trend.
Cover photo: Getty Images
