Inflation in Hungary exceeded expectations in December, with fuel and food prices rising, in what was an ‘unpleasant surprise’ for consumers, ING has commented.
According to the latest data, headline inflation rose to 4.6% in December 2024, exceeding both ING’s 4.5% estimate and the previous year’s figure of 3.7%.
“The increase in inflation was partly driven by a significant 0.5% monthly rise in the average price level and a low base from last year. Although the monthly repricing met our expectations, the composition of the changes caused some surprises,” ING Hungary’s Peter Virovacz and Kinga Havasi commented.
One key driver was a continued rise in food prices, although the increases were more moderate than in prior months. A ‘bigger surprise’, meanwhile, came from a 0.5% increase in the price of spirits and tobacco.
Currency depreciation
The depreciation of the Hungarian currency, the forint, also played a role, resulting in the strongest one-month rise in consumer durable prices (0.6%) recorded during 2024.
Elsewhere, slightly colder weather lead to an increase in the typical household’s energy bill, with fuel prices rising 2.2% on a month-on-month basis, again partly driven by the deprecation of the forint.
“The main factor pushing up year-on-year inflation was the rise in fuel prices,” Virovacz and Havasi commented. “This accounted for almost two-thirds of the acceleration. At the same time, the rise in the prices of processed food and consumer durables can also be seen as a significant contributor. As a result, core inflation rose from 4.4% to 4.7% in December.
“Additionally, these items (food, fuel, and now rents and insurance charges) are significantly impacting perceived inflation, greatly contributing to the overall acceleration in inflation. In other words, household confidence is being impacted not only by the faster-rising official statistical data but also by the increasing perceived inflation, which is exacerbating the negative sentiment.”
Forecast for 2025
Looking ahead, ING forecasts inflation to remain ‘volatile’ throughout 2025, fluctuating between 3.7% and 5.1%, with an annual average of around 4.2%.
“Moreover, perceived inflation could also lead to a further rise in inflation expectations, which is also a negative development from a monetary policy perspective,” the analysts commented. “Against this backdrop, there is little chance of a resumption of interest rate cuts in Hungary in the short term.” Read more here.
