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Hungary Implements Food Price Controls Amid Soaring Inflation
BUDAPEST (Reuters) – In response to an inflation crisis that has recently made Hungary’s prices the highest in the European Union, Prime Minister Viktor Orban’s government has enacted food price controls effective from Monday. This move comes as the inflation rate poses a significant challenge for Orban, who is navigating the political landscape ahead of elections set for 2026.
Hungary’s inflation has surged dramatically since Russia’s invasion of Ukraine in 2022, causing financial strain for many households. Official reports from last week indicated a disturbing annual increase in food prices of 7.1%.
As a strategy to combat rising prices and a sluggish economic recovery, the government has initiated substantial tax reductions for mothers and implemented a cap on retail price margins for 30 essential food items.
The Economy Ministry emphasized its commitment to managing the situation, stating, “If the government observes that retail chains do not comply with the new regulations, we will extend price controls to include all food categories. The administration is also prepared to reinstate regulated prices if necessary.”
Inflation figures from January showed annual inflation in Hungary at 5.7%, surpassing all other EU nations, with the bloc’s average at 2.8%. This marks Hungary as facing not only immediate economic challenges but the potential for sustained inflationary pressure.
Previous inflation spikes have seen food prices align more closely with average EU levels during the years 2022-2023, prompting the government to impose similar price controls. However, a survey by the central bank indicated that the surge in prices was partially influenced by low productivity and high energy costs within the food sector, issues that continue to affect the industry’s performance.
Past attempts to control food prices faced criticism, as companies shifted their losses into price hikes on other goods. Despite this, Hungarian retail group OKSZ has voiced optimism that the latest measures could help reduce food inflation by as much as 1-2 percentage points, provided there are no subsequent increases in supply chain costs.
Economist Peter Virovacz of ING has predicted that inflation may reach a peak of 6.5% by October, suggesting an average rate of 5.6% throughout the period. This projection raises concerns that Hungary may yet again hold the title for the highest inflation within the EU, only three years after a similar occurrence.
According to analysts at Wood & Company, Hungary’s increasing inflation challenges the National Bank of Hungary, now led by Mihaly Varga, as it could undermine the bank’s ability to maintain effective monetary policy.
The persistent rise in inflation, exacerbated by a weakening forint, has led the bank to pause any further interest rate cuts, maintaining a rate of 6.5%, which is among the highest in the EU.
Customers like Peter Hegedus express their frustrations, stating, “Prices have risen dramatically, and it seems they’re continually climbing. There’s an overwhelming sense of tension among everyone.”
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