Hungary is facing the highest inflation in

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Consumer prices in Hungary continued to rise in July, reaching the highest level since 1998, which offers no respite for the National Bank of Hungary, which has already adopted the largest hike in the benchmark interest rate in the European Union , notes Bloomberg, quoted by Agerpres.

Official data published on Tuesday by the National Institute of Statistics show that consumer prices registered an annual increase of 13.7% in July, after an advance of 11.7% in June, mainly as a result of a 27% increase of food prices.

Core inflation, i.e. what remains after the prices of volatile goods such as energy and food are removed, registered an even higher increase of 16.7%, which shows how widespread inflationary pressures are in the economy .

The National Bank of Hungary (NBH) has raised its benchmark interest rate by more than 800 basis points this year, including several cumulative increases of 200 basis points last month, as policymakers struggle to keep inflation under control and support the forint. The Hungarian currency is the third worst performing emerging currency since the Russian invasion of Ukraine, depreciating by more than 8% against the euro.

“The central bank has no choice but to continue the rate hike cycle with decisive steps,” said Mariann Trippon, an economist at CIB Bank in Budapest. Mariann Trippon forecasts that NBH’s base rate will reach 13% by the end of the year, up from 10.75% currently.

Analysts believe that when it comes to prices, the worst is yet to come. While in July inflation was dominated by food prices, with bread and cheese prices increasing by more than 50% year-on-year, things should change in the coming months when the focus will fall on energy prices.

Fuel price caps, which made Hungary the EU country with the lowest prices for petrol and diesel, are being phased out as Viktor Orban’s government tries to cut spending and deal with a possible energy crisis.