Margin freeze: significant price reduction for basic foods, but long-term effects questionable

By: Trademagazin Date: 2025. 03. 19. 10:52

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The Hungarian government introduced a price margin cap on March 17, covering 30 basic food categories and affecting more than 1,000 products. The measure aims to curb inflation and ease financial burdens on consumers. Within the first 48 hours, food prices dropped by an average of 16%, with some items seeing reductions of up to 64%, exceeding the government’s expected 10% price decrease.

Background of the Price Margin Cap

The government introduced this measure in response to persistently high inflation rates in January and February. Minister of National Economy Márton Nagy stated that the initiative is working effectively, resulting in substantial price reductions. However, he also noted that if the price margin cap proves insufficient, the government might consider further interventions, including full price controls.

Notable Price Drops in Specific Products

The following key food items saw the most significant price reductions:

Product	Price Drop (%)
Butter	64%
Sour Cream	58%
Margarine	52%
UHT Milk (1.5%)	45%
Trappista Cheese	40%
Granulated Sugar	35%
Wheat Flour	30%
Table Eggs	25%
Chicken Breast	20%
Sunflower Oil	18%

(Data compares prices between March 13 and March 17, 2025.)

Expert Opinions and Long-Term Implications

While the price margin cap has immediately lowered prices, economic analysts warn about potential long-term consequences. Dávid Németh, a macroeconomic expert at K&H Bank, suggests that the inflation-reducing effects may only last one to two months.

Some economists argue that the measure could lead to future price increases and store closures, as retailers lose profit margins and may raise prices on other products to compensate. Smaller stores could be forced to shut down due to reduced profitability.

Conclusion

The price margin cap has led to substantial short-term price reductions, benefiting Hungarian consumers. However, the long-term impact remains uncertain, and the measure could distort market dynamics, leading to future price hikes and retail sector difficulties. The government and experts are monitoring the situation closely to determine if additional economic measures will be necessary to stabilize inflation and protect market competition.