Economy 19 May 2025, 9:10am

Hungarian inflation no longer European champion, barely making the podium

Portfolio

Although Eurostat, the statistical office of the European Union, will not publish the inflation ranking for April until later today, it is already clear that Hungary's inflation rate was not the highest in Europe. In fact, it is possible that the annual inflation rate, which reached a record high in February, has fallen off the continent's podium. Following the government's price control measures, inflation could even fall to the middle of the EU rankings in the coming months.

Ezrével tűnnek el a boltokból a bankkártyaterminálok - Mégis mi történik?

Margin cap at work, Hungary's inflation retreats

According to Eurostat's calendar, the April inflation rankings will be published on Monday, but the data for almost all countries are already known or at least can be estimated.

It is safe to assume that Hungary, which set a European record for inflation in February, has not regained the top spot and may even have fallen off the podium.

According to the Central Statistical Office (KSH), Hungary's consumer price index moderated to 4.2% in April from 4.7% in the previous month, in line with the harmonised index consumer prices (HICP) calculated according to Eurostat's methodology. Analysts had previously expected inflation to be 4%, but the overshoot of the consensus estimate appears to be linked to a smaller than expected fall in food prices. This could even be interpreted as the initial impact of the margin cap was smaller than expected, as food prices fell by 1.3% on a monthly basis, but the annual price increase of 5.4% was still higher than the 5% expected. In addition to food, the statistical office recorded a significant decline in fuel prices due to the fall in world oil prices.

The April figure means that Hungarian inflation has fallen to its lowest level since November last year, a nasty surprise at the start of the year, when it was the highest in the European Union in February.

Hungarian HICP might make it to the Top3

Official data for April will only be released by Eurostat on Monday morning, but most countries' statistics are already known. Where the EU database does not yet include the Harmonised Index of Consumer Prices (HICP), it is already possible to make an estimate using national data.

It is already clear that Romania and Estonia are ahead of Hungary, with April HICP figures of 4.9% and 4.4% respectively. These are not yet officially in Eurostat's database, but it would be surprising if they were significantly different.

In Poland, the statistical office reported an inflation rate of 4.3%, but did not publish a harmonised price index. With the CPI data showing a significant fall, it would be a big surprise if the HICP did not fall from 4.4% in March, most likely below the Hungarian figure.

as a result there's a good chance hungary's inflation will come in third behind the romanian and estonian hicp.

Looking at the first four months of the year, the average Hungarian Harmonised Index of Consumer Prices was 5.1%, the highest in the EU, tied with Romania. This means that although the rate of price increases has slowed, it is still one of the highest in Europe. The government is taking further measures to curb inflation, with data for the coming months expected to show the price cuts in telecommunications and banking services, as well as the impact of the margin cap on bank charges, insurance premiums, and hygiene products.

These are expected to have a much smaller impact on the inflation figure, but the latest news suggests that the government may be targeting new sectors. A countervailing factor may be that with the margin cap in place for a long time, companies that have suffered losses may start to cross-price.

Economy Minister Márton Nagy stressed on Friday that this was not the end of the measures. The government wants to reduce inflation not only in food, but also in non-food goods and services. The minister announced that another measure is planned, with more information expected early this week.

Central bank has very little room for manoeuvre

Persistently high inflation also means that the central bank (MNB) has little room for manoeuvre to cut rates in 2025. In other words, a cut in the base rate may be futile given the weak economy,

Economists unanimously agree that there is scope only for at most a minimal easing from the current 6.5% rate, and more likely in the second half of the year, in the autumn months.

The Monetary Council will hold its next policy meeting on 27 May to decide on interest rates, and four weeks later, on 24 June, the central bank will publish its latest inflation and GDP forecasts alongside the decision.

Cover photo: Shutterstock