In a notable economic development, Hungary's annual inflation rate has returned to the target range set by the Magyar Nemzeti Bank (MNB), achieving a level of 3.7% in 2024. This marks a significant milestone following a three-year hiatus from such targets, as both the overall consumer price index and the inflation specifically affecting pensioners align with the desired 2-4% range.

This achievement has been underscored by Szalai Piroska, a chief advisor to the Prime Minister and a member of the National University of Public Service's Institute for Economics and Competitiveness Research, in an article published by Mandiner.

For context, the MNB initially set a maximum inflation target of 3% in 2005, and this level was first reached in 2013. In response to a period of particularly low inflation in 2015, the MNB revised its targets to include a range, establishing a current aim of 3% plus or minus 1%.

Hungary experienced prolonged inflation within the 2-4% range between the mid-1970s and the period from 2013 to 2020.

Reflecting on the previous year, Szalai notes that expectations for inflation at the beginning of the year were considerably higher.

The MNB's inflation report from September 2023, which served as the basis for planning the 2024 budget and setting pension adjustments, had forecast an annual inflation rate of 4-6% for 2024. Consequently, the government decided to raise pensions by 6% and announced, through the Permanent Consultative Forum of the Private Sector and the Government (VKF), a 15% increase in the minimum wage and a 10% rise in the guaranteed minimum wage.

Szalai cites data available for January to October, where gross average earnings increased by 13.6%.

It is anticipated that the annual average might be slightly lower due to the heightened 'base' effect from December 2023 following wage adjustments.

The real income growth for the previous year is poised to reach 9%, positioning it as the third-largest increase since 1992, following gains of 12.3% in 2002 and 10.3% in 2017. Comparing the 2024 average earnings to their 2019 levels, despite a 'polycrisis' period, there has been a real increase of 20%, illustrating enhanced purchasing power beyond pre-pandemic levels.

The December inflation data, while slightly higher than preceding months, was anticipated due to the base effect.

The MNB's latest inflation report suggests rates of 3.3-4.1% for the present year, indicating a possible continued moderation in price increases.

In contrast, the Eurozone reported an inflation rate of 2.4% in 2024, higher than the ideal level; its target is to keep consumer price increases below 2%.

The Eurozone has struggled to meet its target range since 2020.