MNB: inflation will rise temporarily, but may remain within the three percent range in 2025

Inflation was 3.7 percent in November, which shows a marked decrease compared to previous years. At the same time, core inflation was 4.4 percent, which shows that this is not yet a sign of price stability, which is expected to be achieved only in 2026.

The rate of inflation largely corresponded to the September forecast, but there were surprises in terms of its structure. Core inflation was 0.6 percent lower than the September forecast, but the increase in the price of unprocessed food and fuel was higher than expected.

According to the MNB, this was also due to the fact that in previous years companies increased their prices more in some areas, which meant profit inflation, but in October this year this already led to a price decrease, for example in mobile phone and internet services, concentrated alcoholic beverages and pet food. Demand continues to lag behind the supply level, which restrains further price increases, but in retail, based on company expectations, uncertain price changes may also occur at the beginning of next year.

Based on the central bank’s forecast, inflation is expected to be 4.3 percent in December and 4.6 percent in January, which will start to decrease in the second quarter of next year, and from March it will be within the inflation tolerance band for the majority of the year.

Based on the medium-term forecast, the MNB raised its forecast for 2025 by 0.5-0.6 percent due to supply effects and the weakening of the forint exchange rate, so next year it is expected to be in the range of 3.3-4.1 percent, compared to the range of 2.7-3.6 percent forecast in September.