Inflation in Hungary declines further, down to 12.2 percent in September

Consumer prices rose by an average of 12.2 percent in September compared to the same month a year earlier, with fuel prices rising significantly and food prices falling compared to August, the Hungarian Central Statistical Office said on Tuesday. Consumer prices rose by 0.4 percent on average in a month, with food having become 0.2 percent cheaper.

Compared to September last year, food prices were 15.2 percent higher, with sugar up 61.3 percent, chocolate and cocoa up 26.1 percent, and soft drinks up 24.0 percent. Within this product group, the price of flour fell by 13.9 percent and that of margarine by 1.2 percent. Household energy cost 14.6 percent less, with a decrease of 33.5 percent for piped gas, 3.2 percent for electricity, while the cost of firewood and cylinder gas increased by 18.7 percent and 9.7 percent respectively.

Fuel prices increased by 35.4 percent in a year. Services rose by 13.6 percent, including motorway use, car rental and parking costing 22.2 percent more, holiday services were 20.2 percent more, sports and museum admissions 17.5 percent more, vehicle repair and maintenance 16.9 percent more. Prices of alcoholic beverages and tobacco also increased (15.5 and 10.1 percent respectively).

Compared to the previous month, August, the above prices rose by 0.4 percent. Food prices fell by 0.2 percent on average, with flour down 3.4 percent, seasonal food (potatoes, fresh vegetables, fresh domestic and tropical fruit combined) down 3.0 percent, sugar and pasta both down 2.6 percent, eggs down 2.0 percent, margarine down 1.8 percent, dairy products down 1.7 percent and milk was 1.5 percent cheaper.

Non-alcoholic beverages (up 2.4 percent), fruit and vegetable juice (up 0.9 percent) and pork (up 0.8 percent) were more expensive. Fuel prices rose by 3.3 percent. Clothing was 1.8 percent more expensive, household energy 1.0 percent, firewood 7.7 percent more expensive, while the price of piped gas remained the same.

Will Orbán's goal be reached?

As the end of the year approaches, the big question now is whether Orbán's target of inflation being below 10 percent in December will be achieved. He had set this as a target in his annual address back in February, saying that 2023 would be all about bringing inflation down.

The current data suggests that inflation being below 10 percent in December is within the realms of possibility, but if we do a little more digging, the prices in Hungary do not actually paint such a rosy picture. Last year's annual inflation was 14.5 percent, and this year it is expected to be around 17.9 percent, which means an increase of exactly 35 percent over two years. The last time this happened was in the years after the regime change, and it wasn't well received.

Opinions are divided on who is to blame for the higher prices. György Matolcsy, Governor of the Central Bank, (MNB) recently said:

"The use of price caps alone has pushed inflation up by 3-4 percent. It was an adventurist economic policy."

According to him, it was only thanks to the Hungarian Central Bank's emergency programme that inflation did not go even higher, which is also what made achieving a single-digit rate of increase by the end of the year realistic.

The government, of course, doesn't agree, and according to László Parragh, President of the Chamber of Commerce and Industry, who follows their train of thought, it was the MNB's handling of inflation that was wrong. And in terms of the outcome, he says it is a "small consolation that they don't understand this".

Orbán went even further recently, when he said in parliament that the Central Bank was unable to cope with inflation, so the government would take over the task from them. Fiscal and monetary policy have been at odds for some time, and it's likely to remain that way for a while. By the way, the MNB expects the Hungarian inflation rate to be 5 percent next year and 3 percent in 2025.