Debrecen4U
June 10, 2026
Last Month’s Inflation Figure Comes as Surprise
Analysts attribute the slowdown in inflation in May primarily to the impact of the strong forint, which gives the central bank’s Monetary Council the green light for its next interest rate cut. In response to the latest data, research houses have revised down their inflation forecasts for this year.
According to the latest report from the Hungarian Central Statistical Office (KSH), the annual rate of increase in consumer prices slowed to 1.8 per cent in May from 2.1 per cent in April, while prices remained unchanged on average compared with April. Analysts had expected a slightly stronger increase in prices of 2.2 per cent for May.
In a commentary sent to MTI, Orsolya Nyeste, Chief Macroeconomic Analyst at Erste Bank, highlighted that consumer prices remained unchanged month on month, contrary to expectations of a slight increase, while annual inflation slowed. This came as a major surprise, as forecasts had pointed to a modest acceleration in inflation. Core inflation also remained low. In practice, the data may amount to a green light for the National Bank of Hungary (MNB) to cut interest rates at its next meeting.
The positive surprise essentially came from food prices, although there was little sign of any significant repricing activity in the other major consumer spending categories either. It is encouraging that inflation in manufactured goods appears to be genuinely restrained by the strong forint, while there was also no notable inclination to raise prices in the services sector, the expert noted. Overall, the broader picture remains unchanged: as long as the extensive administrative price controls remain in place, there is little short-term inflationary pressure, she pointed out.
Inflation may return to an upward path in the coming months, although the pace of acceleration now appears likely to be more modest than previously thought. Following the exceptionally low inflation recorded during the first five months of the year, Erste Bank has lowered its forecast for average annual inflation in 2025 to 2.8 per cent.
Péter Virovácz, Chief Economist at ING Bank, also emphasised that inflation slowed in May despite expectations to the contrary. This outcome was more favourable than anyone had anticipated, as there was not a single analyst on the market who had forecast a decline in inflation. Given that the Strait of Hormuz has effectively been under blockade for a third consecutive month, the development of the Hungarian inflation data runs counter to virtually every known economic relationship with some exaggeration, he remarked.
Among the main surprise factors, he highlighted the decline in food prices as the most significant, explaining that the impact of the strengthening forint had finally begun to reach consumers. The favourable euro-forint exchange rate also affected durable consumer goods, while discounting ahead of the FIFA World Cup helped pull down average prices within this product category.
According to ING Bank’s latest flash estimate, inflation is unlikely to accelerate to around 3 per cent until autumn. As a result, ING Bank now expects average inflation of only 2.6 per cent for the year as a whole.
The latest inflation data clearly give MNB the green light for a rate cut in June; the only remaining question is whether the Monetary Council will opt for a reduction of 25 or 50 basis points.
The May inflation figures also came as a major positive surprise for Dániel Molnár, Lead Analyst at the GFÜ Economic Analysis Centre, with the pace of price growth falling significantly short of prior expectations. Instead of the usual seasonal monthly increase, food prices declined. According to the analyst, exchange-rate effects likely played a particularly important role, as they did in the pricing of clothing and durable consumer goods. The fall in household energy prices was also influenced by last year’s high base effect and the impact of the utility price freeze introduced in January, he wrote.
Looking ahead, however, the pace of price growth is expected to accelerate, he warned. The impact of the war in Iran on energy markets may gradually feed through into inflation over the coming months. The future path of domestic inflation will depend on the protected pricing of fuels and the timing of the withdrawal of retail margin caps. The GFÜ analyst expects inflation to accelerate gradually in the coming months, rising above 4 per cent by the end of the year. Based on the May data, the central bank may cut interest rates again at its June meeting, as inflation figures in recent months have come in below previous forecasts and markets have already begun discounting monetary easing.
Source: dehir.hu | Photo credit: Pixabay
