Confirming the obvious: price caps will be extended beyond end-August
HUNGARY
- In Brief
24 Aug 2025
by Istvan Racz
We had this coming from the first instance. PM Orbán has just announced that the government's administrative caps on the gross retail margins of certain food items and household goods will be upheld after August 31, when, in the legal sense at least, those measures were set to expire. He did not say what the new legally set date of expiry will be, but we are pretty much convinced that these caps will be maintained at least until the election in April 2026, even if formally a new expiration date before next April is set initially. As a reminder, the caps affect about 8.5% of the CPI basket, and the one-time impact of their introduction (in two batches in March and May) has been estimated at 1.3%-point, by which amount they reduced the year-on-year headline rate of CPI-inflation, to 4.3% in July. It had been essentially certain that the caps would not be removed any time soon, as that would most probably lead to a more or less immediate bounce-back of prices in the affected circle of goods, to largely where they were before the measures were introduced. This is not something that would be politically acceptable for the Fidesz government. It needs to be noted here that existing government policies are aiming at boosting consumer demand further in the remaining period until the election, which implies the potential for additional upward pressures on consumer inflation, of course.
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