Hungary continues to face persistent inflationary pressures despite a modest slowdown in annual inflation, according to the latest data from the Hungarian Central Statistical Office (HCSO) and analysis by ING economists. While headline inflation decelerated to 4.3% year-on-year in July 2025, underlying monthly inflation accelerated, reflecting structural challenges that dampen hopes of a swift return to price stability.

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The monthly price level rose by 0.4% in July, surpassing expectations and ending a period of slower price adjustments attributed largely to government interventions. ING notes that “the favourable inflation picture of the past four months was mainly due to the impact of government price measures and voluntary price restrictions implemented during this period.” However, without fresh measures, the “one-month inflation-curbing effect of all measures had essentially worn off by July,” leading to a notable monthly price increase.

Despite this monthly rise, the annual inflation figure was softened by a high comparison base from the previous year, which saw inflation peak during energy shocks. The 4.3% headline rate still exceeds the upper limit of the National Bank of Hungary’s (NBH) inflation tolerance range. ING summarises the situation: “Despite all efforts, structural inflation remains high in Hungary.”

A range of factors contributed to this persistent inflation. Service inflation decelerated more slowly than expected, driven largely by rising prices for transportation services, especially air travel to long-distance destinations. Household energy prices surged, with higher gas bills pushing energy inflation back into double digits, a phenomenon last seen during the energy price shocks of summer 2023. Seasonal declines in clothing prices were smaller than usual, while prices of durable goods declined slightly, aided by a stronger forint. Food inflation remained just under 6% year-on-year but was marked by “supply-side shocks (e.g., frost, drought, and epidemics affecting livestock)” which pushed up prices for meat, fruit, and vegetables.

Core inflation, excluding volatile food and energy prices, slowed to 4.0% in July. However, ING points out this decline was “largely due to last year’s high base.” Encouragingly, “seasonally adjusted three-month annualised core inflation still meets” the NBH’s 3% price stability target, but the overall picture remains mixed.

Looking ahead, ING highlights the uncertainty facing Hungary’s inflation outlook: “It will be interesting to see if the mild trend-like decline in inflation expectations among households continues after the four-month period of low repricing, or if it stalls or reverses due to soaring energy bills, higher food prices and more expensive holidays.” Such a reversal “would certainly be unfavourable for monetary policy, especially since price expectations are still too elevated.”

The government’s decisions on price shield measures will be crucial for inflation trajectories. If these measures are phased out as planned, inflation could rise above 5% year-on-year by October. ING maintains its forecast of a 4.6% average inflation rate for 2025 but signals that this may be revised depending on forthcoming government action. The institution expects inflation to “average around 4% over the next two years,” with the possibility of the “hawkish monetary policy stance and unchanged base rate” continuing, and an increasing likelihood of rates remaining stable for longer than previously anticipated.

More information:
ING Global Markets Research
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