Hungary's Inflation Falls to 1.3%: Food Prices Drop, Central Bank Cuts Key Interest Rate to 5.5%

Inflation in Hungary stood at 1.3% in August, down from 4.3% in August 2025. This was reported by the Hungarian Central Statistical Office (KSH) on September 8. Compared to July, prices rose by 0.2%. The core rate stood at 2.0%, and the harmonized consumer price index at 1.8%. In July, inflation had been 1.2%.

Food and energy are dragging down the index

Food prices were 1.4% lower than a year ago. Excluding restaurants, the decline was even more pronounced at 4.8%. According to the KSH, canned meat became 27.0% cheaper, butter 15.5%, pork 12.9%, cheese 11.1%, and milk 8.1%. Electricity, gas, and other fuels cost 4.3% less, with gas alone down 10.9%.

Services, on the other hand, became 5.0% more expensive. Theater tickets cost 17.6% more, taxi rides 11.0% more, postal services 9.6% more, and car repairs 8.1% more. On a month-over-month basis, service prices rose by 0.8%. Fuel prices were 1.3% higher than in August 2025, and medication prices were 3.7% higher.

Central Bank Cuts Key Interest Rate and Expects to Reach Target Only in 2028

The Hungarian central bank (MNB) cut its key interest rate by 25 basis points to 5.50% on August 25. July inflation came in below the bank’s June forecast. The Monetary Policy Council stated in its announcement: “The inflation rate will remain below the central bank’s 3% target for the remainder of this year and all of next year before returning to the target in the first half of 2028.”

The MNB attributes the rise in prices for market services to revaluations in the banking and telecommunications sectors following the end of voluntary price caps. According to the MNB, households’ inflation expectations are below the level seen at the beginning of the year. The Council intends to decide on the future interest rate path based on the September inflation report.

The real economy is growing modestly. Gross domestic product rose by 1.7% in the second quarter. Industrial production increased by 4.7% year-over-year and by 1.7% month-over-month in July, driven by vehicle manufacturing and electronics. The food industry and manufacturers of electrical equipment saw a decline in production. Retail sales in July were 4.9% higher than a year earlier.

The environment is improving for German exporters of consumer goods. Inflation is low, interest rates are falling, and retail sales are growing by 4.9%. However, it is difficult to implement price increases in the Hungarian retail sector as long as food prices are falling. Investors should monitor fiscal policy and the euro debate: The MNB cites both as key factors in Hungary’s risk assessment.

Sources: KSH, Consumer Prices August 2026 (EN); KSH, Industry July 2026 (EN); KSH, Retail July 2026 (EN); MNB, Monetary Policy Council press release dated August 25, 2026 (EN)

SK, Frankfurt