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“Butter-wars” a Turning Point in Inflation

Hungary Today 2023.03.07.

Inflation in Hungary may have peaked, as the rate of consumer price inflation slowed, albeit slightly, in February, after 25.7% in the previous month, wrote the economy daily, VG.hu. The slight decrease could mark the beginning of the turnaround that shoppers have been waiting for.

After long months, inflation in Hungary may have finally passed its peak, after 25.7 percent in January, the dynamics of consumer price increases slowing down in February by a few tenths of a point. The rate of increase in February was 25.4 percent on an annual basis meaning that, for the first time in a year and a half, annualised price increases in Hungary stopped rising.

At the same time, Péter Virovácz, senior analyst at ING Bank, called for caution pointing out that

on a monthly basis, overall inflation could remain above the level needed to achieve price stability.

In the case of food, although we have already witnessed significant price declines in some categories during February, the monthly inflation indicator for the whole product group could remain positive.

In the first week of February, Aldi announced a 20% cut in the price of butter, as did Lidl, Penny and CBA. Since then, the major supermarket chains have taken similar decisions for cheese, suggesting that this is not an isolated phenomenon.

Aldi was the first major supermarket chain to lower the price of butter. Photo: Pixabay

The other important item that may have also held back the rise in the overall price level during the month was the development of fuel prices and the strengthening of the forint seen in February. The latter may have filtered through to imported inflation, mainly reflected in the prices of imported food and consumer durables. Fuel prices fell by an average of 6-6.5% on a monthly basis, which may have reduced inflation by around half a percentage point

The rate of monetary depreciation will remain at an extremely high level in the coming months, and after a long plateau we could see the first annual index below 20 percent in the second half of the year, Mariann Trippon, senior analyst at CIB Bank, told Világgazdaság. The second half of the year, however, could bring more intense disinflation: easing global inflationary pressures, a more stable forint exchange rate, the disinflationary impact of moderating domestic demand, together with a high base should push the rate of monetary deflation below 10% by the end of the year. However, the analyst still expects average price level increases of between 17.5 and 19.5 percent on average over the year.

Via VG.hu, featured photo: Pixabay

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