The latest data released by the Hungarian Central Statistical Office (KSH) showed that annual inflation slowed to 1.7% in June, once again below market expectations. The figure marks another month of exceptionally subdued price growth and strengthens the case for additional interest rate cuts after the MNB’s expected moves later this month and in August.
Food prices, typically subject to seasonal fluctuations, edged lower on a monthly basis, while annual price increases remained minimal. Analysts attributed the favorable inflation reading to the government’s continued food retail margin cap and the appreciation of the forint, both of which helped contain imported inflation. Clothing and durable goods prices also followed normal seasonal repricing patterns, while household energy costs increased modestly, largely reflecting higher consumption during the unusually cool weather earlier in the spring.
Fuel prices remained broadly unchanged in June. Although market prices slipped below the government’s protected price level towards the end of the pricing period, the effect will only appear in July’s inflation statistics. On an annual basis, however, motor fuel prices were still 1.6% higher despite the price regulation.
Services continued to represent the largest source of inflationary pressure. Prices in the sector rose by 0.3% month-on-month, broadly in line with seasonal patterns, while annual service inflation remained elevated at 4%. Holiday-related services, cultural activities, and labor-intensive personal services, including healthcare, beauty and household services, recorded above-average price increases, reflecting continued wage growth rather than exchange-rate movements or imported cost pressures.
Against this backdrop, ING Bank has lowered its forecast for average annual inflation this year to 2.1%, while projecting inflation to accelerate to around 3.5% in 2027, primarily due to stronger domestic demand. Even so, the bank believes inflation could remain close to the MNB’s 3% target from the end of next year.
“The latest inflation data effectively cements a July rate cut, and unless we see another geopolitical escalation, an August reduction also appears highly likely,” says Péter Virovácz, chief economist at ING Bank. “If July also delivers another low inflation reading, the door will clearly open for monetary easing to continue into the autumn.”
Erste Bank also highlighted that June marked the second consecutive month in which Hungary’s overall price level remained unchanged on a monthly basis. According to János Nagy, the bank’s macroeconomic analyst, government price measures have played an important role in suppressing inflation, but the stronger forint has become an even more significant disinflationary force through lower import costs.
“Our current inflation forecast of 2.4% for this year now appears too high, suggesting another downward revision may soon be necessary,” he admitted.
Gábor Regős, chief economist at asset management company Gránit Alapkezelő, likewise believes the latest inflation figures provide ample room for the MNB’s Monetary Council to implement its planned 25-basis-point rate cut in July, while not ruling out another reduction in September following the one already signaled for August.
According to Péter Kiss, investment director at Amundi, the combination of favorable food and fuel price developments and the strong forint has kept headline inflation exceptionally low.
“The favorable developments in food and fuel prices, combined with the strong forint, have kept annual inflation at subdued levels. However, we believe this marks the low point for this year, with inflation likely to increase gradually towards year-end. Even so, we expect annual inflation to reach only around 3.1% by December, just above the midpoint of the central bank’s target range,” he said.
Kiss added that the latest data supports the MNB’s easing cycle and could further boost demand for Hungarian government bonds. However, lower interest rates may reduce some of the upward momentum behind the forint.
“If both domestic and external conditions remain favorable, there is a strong chance that rate cuts will continue during the autumn,” he added.
Analysts at MBH Bank also see room for further monetary easing beyond the summer. Senior analyst Márta Balog-Béki expects inflation to remain close to 2% until the fall, before edging higher towards the end of the year as the government gradually phases out retail margin caps.
Based on current trends, MBH forecasts average annual inflation of 2.2% this year and 3.4% in 2027, while acknowledging that risks to the forecast remain tilted to the downside following the latest data release.
The bank expects the MNB to lower its benchmark rate by 25 basis points in both July and August, bringing the policy rate to 5.5% by the end of the summer. Should recent favorable trends prove durable, even lower interest rates may become possible.
Encouraging signs also emerged from Hungary’s industrial sector. According to KSH data, industrial production increased by 2.3% month-on-month in May, while adjusted annual output expanded by 5.4%, marking the strongest year-on-year growth since December 2022.
“The industrial sector has been on an upward trajectory since late 2025, and current production capacities and order books suggest no sharp reversal ahead. Two counties, Hajdú-Bihar and Komárom-Esztergom, are driving industrial growth thanks to newly installed manufacturing capacity,” said ING’s Virovácz.
Thanks largely to the strong May performance, industrial output during the spring quarter exceeded winter levels by 3.1%. Nevertheless, analysts caution that the recovery remains uneven.
“We expect industrial production to move onto a more stable growth path in the coming months, partly due to favorable base effects. However, a sustained recovery will still depend on stronger external demand and a reduction in global uncertainty,” said Dániel Molnár, chief analyst at economic think-tank GFÜ Gazdaságelemző Központ.
Orsolya Nyeste, macroeconomic analyst at Erste Bank, described the figures as significantly stronger than both her own expectations and the market consensus.
“On a monthly basis, industrial output effectively surged,” she said. “The May data reinforces our view that the improving trend, which began at the start of the year, is likely to prove sustainable. Despite uncertainties stemming from the war and the European economic environment, industry could once again make a positive contribution to Hungary’s economic growth in the second quarter.”
This article was first published in the Budapest Business Journal print issue of July 17, 2026.
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