Central Bank Issues Inflation Report

In May 2025, inflation rose to 4.4%, while core inflation fell to 4.8%. In the short term, partly mandatory, partly voluntary price restriction measures have a strong diminishing effect on inflation. At the same time, strong repricings can be observed in the pricing behaviors of companies, the National Bank of Hungary (MNB) reports on its website.

The report points out that price changes in May were slightly above historical levels in the case of tradables. Excluding the impact of one-off measures, in the case of market services, the price increase was also strong. Inflation expectations of households decreased but remain at high level.

For the rest of the year, inflation is expected to stay above the tolerance band. In the medium term, with buoyant consumer demand, volatile commodity market movements and persistently strong wage dynamics point to an acceleration in underlying inflation. The rate of price increases may decline persistently to the tolerance band in early 2026 and reach the 3% inflation target in early 2027. According to the MNB’s projection, inflation is expected to average 4.7% this year, and the consumer price index could be 3.7% in 2026 and 3.0% in 2027.

In 2025 Q1, Hungarian economy stagnated. Real economic developments in Hungary were characterised by dual trends in the first quarter, in addition to the vigorous growth in household consumption, the decline in investment is prolonged. The export of tradables is restricted generally by the uncertain global market environment. Wage dynamics slowed in the first months of 2025. The number of employees did not change significantly: employment continued to be at high levels.

The unemployment rate remains low, while the tightness of the labour market has eased further in recent quarters. The high-frequency data for the spring months continue to indicate subdued performance. In the second quarter, the duality continued: in April retail sales increased by 5%, while industrial production decreased significantly, and construction activity decreased slightly, compared to the same period of the previous year. A gradual recovery is expected in the second half of the year, supported by stable and strong growth in consumption, the slowly normalising external
economy as well as base effects. Overall this year, a 0.8% GDP growth is expected, which is lower than the March Inflation Report’s forecast.