July inflation data was moderately disappointing

HUNGARY - In Brief 08 Aug 2025 by Istvan Racz

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The headline rate was reported at 0.4% mom, 4.3% yoy, the latter down from 4.6% in June, core inflation fell to 0.4% mom, 4% yoy, down from 4.4% yoy in the previous month, and non-fuel inflation was 0.4% mom, 4.9% yoy, the latter falling only marginally, from 5% yoy previously: This was somewhat disappointing, after the widespread expectation of a deeper reduction of headline inflation on powerful base effects (see yesterday's note on the same subject). The negative surprise came from two main sources: (a) food, the average prices of which rose by 0.3% mom, unexpectedly high; and (b) medicines, where there was only a 0.3% mom decrease, much less than one would have hoped for, in view of the start of a 'voluntary' price control scheme on July 1. These factors did not affect core inflation very much, as rising food prices had a strong component in the area of seasonal items, like fruits (+8.4% mom), which are excluded from the core indicator. So the only consolation for the higher than expected headline figure can be the fact that core inflation is now down at 4% yoy, which is the top end of the MNB's medium-term target range. The fact that this has been reached on the back of a considerable amount of administrative price regulation is another question, of course.