This is guaranteed by Hungary’s rising wages and also by the country’s dynamic economic growth, which stabilises price levels, he said. Further, core inflation, which strips out volatile fuel and food prices, is above 1%.

He said the low CPI would have a positive effect on Hungary in the short run, as it leads to a growth in consumer purchasing power, which will increase consumption.


He added, however, that prolonged deflation is unfavourable for the economy as it results in declining revenues for companies, forcing cuts in labour costs, which leads to downward wage spirals, he said.

Data released by the Central Statistical Office on Wednesday put the May inflation rate at negative 0.2%.

Republished with permission of Hungary Matters, MTI’s daily newsletter.