Hungary’s high inflation data for December has seemingly surprised analysts. They said that inflation grew on the back of the “surprisingly steep” rise in food prices.
Hungarian annual inflation was 7.4 percent in December, according to the Central Statistical Office (KSH). It equals the November data, which marked a 14-year high.
K&H lead analyst Dávid Németh said inflation was expected to slow within 6-12 months. For 2022, he expects annual inflation to be around 5.5 percent, with the December data possibly falling below 4 percent. Government measures such as price caps on basic foods and on fuel could reduce inflation, he said, but uncertainties regarding the duration of the fuel price cap make the extent of that effect unpredictable.
Péter Virovácz of ING Bank said the price cap was expected to reduce inflation by 0.1-0.2 percentage points. Meanwhile, January is expected to see even steeper price rises before the price caps are introduced. ING is calculating with 5.6-5.7 percent inflation in 2022. They also expect the central bank to further hike interest rates in the coming months; by how much will depend on the January data, he said.
Takarékbank’s Gergely Suppan said the 6.4 percent core inflation, an “unexpectedly steep jump,” was due to rocketing food prices. Inflation is expected to slow in the coming months, although international trends will keep it higher than previously expected. Further risks include wage hikes, rising wage costs, and growing consumption, he said. Takarékbank is raising its inflation forecast to 5.5 percent for 2022, he said.
Gábor Regős of pro-Fidesz Századvég Gazdaságkutató highlighted the importance of the January inflation data, which will show retail price rises and have a bearing on monetary policy in the coming year. Századvég expects inflation to be above 5 percent in 2022. Wage hikes will drive an uptick in retail turnover, he said. According to him, normalizing markets, the easing of supply difficulties, and a stringent monetary policy could curb inflation.
János Nagy of Erste Bank said the price caps on basic foods would curb flyaway prices in the sector but do little to slow inflation, which is expected to reach the target by 2023 the earliest. Several sectors have forecast a 10-20 percent price hike in 2022. The expansive fiscal policy planned for the year is also a risk regarding prices, he said. He expects the inflation rate in 2022 to surpass 5 percent.
Featured photo illustration by Zoltán Nagy/MTVA