Inflation warning: Expect the year-on-year headline rate fall significantly in July

HUNGARY - In Brief 07 Aug 2025 by Istvan Racz

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CPI-inflation data for July is due in the morning tomorrow. In June, the yoy headline rate was 4.6%. Against that, analysts, including us, expect a material reduction to 4.1% yoy (the median value in Portfolio.hu's monthly analyst poll).This reduction would be due essentially to two base effects. The first one is about fuel prices, which rose by 3.8% mom, 6% yoy in July 2024. The corresponding figures we expect at 0.5% mom, -3.9% yoy in July the year. The other one is the fact that a previous administrative scheme under which supermarkets and small food shops were required to offer a certain part of the goods they were selling at discounted prices ended on June 30, 2024. As a result, food prices rose by a non-seasonal 0.6% mom in July 2024. So, the monthly headline inflation rate was 0.7% in July 2024, and this looks like easy to beat by the July data this year.By the way (1), the same analyst poll resulted in a median expectation of 4.1% yoy headline inflation for end-2025 (i.e. unchanged between July and December), and 4.6% yoy for end-2026. The latter appears to be quite pessimistic at first glance, but it sounds logical on the grounds that the coming election year may lead to increasing upward pressure on consumer demand and prices.By the way (2), a new element of administrative interference with consumer prices was introduced from July 1. This was a 'voluntary' price control scheme agreed between the pharmaceutical industry and the government. With this scheme, just like in the case of banks, telecom and insurance, the government have given up a certain amount of their extraordinary tax revenues collected from the sector, in exchange for, in this specific case, me...