Price Cap on 30 Essential Food Products: Government’s Strategy to Curb Inflation

What Does the Price Cap Mean?

According to Index, the price cap will limit the profit margin between the purchase price and the retail price of these selected products to a maximum of 10%. This means that retailers will only be allowed to sell these items with minimal markup. The goal of this decision is to prevent artificial price hikes and slow down inflationary pressures.

How Long Will It Be in Effect?

Currently, the government plans to keep the price cap in place until May, when it will review the regulation’s impact and decide whether to extend or modify it. The timing of the measure is no coincidence: recent data from the Hungarian Central Statistical Office (KSH) shows that inflation has risen again, and food prices have reached levels not seen since 2023.

List of Affected Products

The regulation covers a total of 30 essential food products, including meats, dairy products, flour, sugar, and eggs:

• Chicken breast fillet
• Chicken thigh
• Chicken back
• Chicken wings
• Whole chicken
• Turkey breast fillet
• UHT milk (1.5% and 2.8% fat content)
• ESL milk (1.5% and 2.8% fat content)
• Cooking oil
• Margarine
• Pork fat
• Butter
• All-purpose flour
• Pastry flour
• Late-harvest potatoes
• Granulated sugar
• Pork leg
• Pork loin
• Pork ribs
• Pork shoulder
• Eggs
• Sour cream
• Trappista cheese
• Cottage cheese
• Plain yogurt
• Fruit yogurt
• Garlic
• Bologna sausage

What Does This Mean for Consumers and Retailers?

For consumers, the price cap could bring short-term relief by preventing significant price increases on these essential food items. However, for retailers, the measure presents a significant challenge, as supply chain costs continue to rise, and the low profit margins could even lead to financial losses on some products.

A key concern is whether this measure will impact product availability. Based on past experiences with price caps, there is a risk that certain items may temporarily disappear from store shelves, or that the variety of available products may be reduced.

A Fight Against Inflation or a Temporary Fix?

The government argues that the price cap is a necessary step in the fight against inflation, helping to reduce the financial burden on households. Critics, however, warn that such interventions may work in the short term but can distort the market and discourage investment in the long run.

The next few months will reveal whether the price cap successfully mitigates food price inflation and how it affects the domestic food market. The review in May will be crucial in determining whether the measure remains in place or if alternative strategies will be implemented to tackle inflation and the decline in purchasing power.