Hungary's July inflation drops to 1.2%, a decade low

Hungary's headline inflation rate fell to 1.2% in July on an annual basis, the lowest level in nearly a decade, according to fresh data. The figure marks a sharp slowdown from June's 1.7% reading, while core inflation also eased slightly to 1.9% from 2%.

The decline strengthens the case for the central bank to continue its easing cycle. The Magyar Nemzeti Bank has already trimmed its benchmark rate by 25 basis points to 5.75% last month, and policymakers had signalled further cuts during the summer.

Analysts see the latest inflation print as clearing the way for another reduction in August, with a strong likelihood of a follow-up move in September. Erste Bank's Orsolya Nyeste noted that food prices remain the biggest disinflationary driver, though risks from drought and geopolitical tensions could push commodity costs higher next year.

ING Bank economist Peter Virovacz said the August cut is likely a formality, and unless a global energy price shock emerges, the easing cycle should continue into autumn. He projects the base rate could fall to 4.75% by the end of the year.

Inflation is expected to stay below the central bank's 3% target for the rest of 2025, helped by a strong forint that keeps imported prices in check. The bank has said it will reassess the path of rate cuts based on its September Inflation Report and fresh projections.