Viktor Orbán can relax as early as Tuesday due to the development of food inflation
In July of this year, the inflation indicator is expected to decrease significantly in Hungary, and this does not come as a surprise to economic analysts. Hungarian inflation has been the highest in the European Union for a long time, which poses a serious challenge to the country. The main reason for the decrease in inflation is the drop in food prices, which is also contributed by seasonality and the decrease in producer prices. The decrease in energy and transport costs also has a positive effect on the inflation indicator. In addition, the strengthening of the forint in the spring and summer months also contributed to the favorable development of the price index.
“In July of this year, the inflation indicator is expected to decrease to an unusually large extent. On the one hand, this stems from last year’s high base, as the consumer basket rose in price by more than two percent last July (in one month). On the other hand, a slight price drop is expected to occur in July this year. The primary driver of the 0.1 percent deflation on a monthly basis is the drop in food prices. On a monthly basis, I expect a significant decrease of around 2-3 percent in this range of products”
Péter Virovácz, ING’s senior analyst, told Index.
According to economic analysts, the favorable inflation indicators are due to the combined effect of several factors. The stable state of the food market, favorable agricultural performance and government measures also contribute to low inflation. Based on the July data, not only the main inflation indicator, but also the core inflation may show a level around stagnation, mainly due to the sharp drop in food prices.
The decline in food prices may continue in the coming months, however, the increase in fuel prices and the weakening of the HUF may have a negative impact on the price level. Analysts believe that inflation, both the main indicator and the level of core inflation, may fall below 18 percent in the next period.
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