Macro Newsletter
Domestic News
• The Central Bank of Hungary kept its key base rate at 6.5% during its March 2025 meeting, citing a weak EUR/HUF exchange rate, rising inflation, and the need to maintain stability. The bank signaled no imminent rate cuts, with the exchange rate ruling out any reductions in the near future.
• Hungary's annual inflation rate accelerated to 5.6% in February 2025, up from 5.5% in January 2025, exceeding market expectations of 5.3%. Food prices rose further (7.1% vs. 6% in January), while inflation also increased in the services sector (9.2% vs. 8.5%). Core inflation, which excludes volatile items such as food and energy, climbed to a 14-month high of 6.2% in February, compared to 5.8% in the previous month.
• The EUR/HUF exchange rate recently strengthened to below 400 forints, primarily due to the central bank maintaining interest rates. The currency was also supported by encouraging developments regarding the resolution of the situation in Ukraine. However, significant uncertainty remains, particularly concerning the evolving trade policies of the United States.
Domestic News
• In January 2025, industrial production fell by 3.9% year-on-year, with transport equipment manufacturing, which accounts for 26% of total manufacturing output, declining by 3.0%. Within this sector, motor vehicle production saw a slight decrease of 0.1%, while the manufacture of parts and accessories dropped by 6.2%.
• Retail sales in Hungary, however, showed strong growth, rising by 4.7% year-onyear in January 2025 after stagnation in the previous month. This marked the fastest expansion since May 2022, driven by increased sales in both food, beverages, and tobacco, as well as non-food products (5.6% vs. 0.5%).
• Investment volumes recorded a sharp decline, falling by 13.8% year-on-year in Q4 2024, matching the full-year contraction reported by the Hungarian Central Statistical Office (HCSO). Meanwhile, the yield on Hungarian 10-year government bonds rose to approximately 7.1%, reflecting a stagnant base interest rate and market expectations. As of March 25, the yield stood at 7.17%.
EUR/HUF ex. rate (2020-2025)
Source: Trading economics
Energy market
• European natural gas futures continued to decline, trading around €42/MWh on March 25, as traders closely watched the outcome of ongoing US-Russia talks in Saudi Arabia regarding the war in Ukraine. A 12-hour meeting between US and Russian officials on March 24, following earlier discussions between American and Ukrainian teams, raised hopes for a potential ceasefire. This, in turn, fueled expectations of increased gas flows from Russia to Europe. Additionally, the approaching end of the heating season, coupled with rising solar and wind power generation, is shifting Europe’s energy mix away from gas.
• Meanwhile, Brent crude oil futures remained below $73 per barrel at the end of March 2025, as global supply concerns intensified following President Donald Trump’s announcement of a 25% tariff on US imports from countries purchasing oil from Venezuela. Set to take effect on April 2, this policy could disrupt crude flows to key refiners in China, India, Spain, and the US.
Brent
Eurozone
• The European Central Bank (ECB) cut its key interest rates by 25 basis points in March 2025, lowering the deposit facility rate to 2.50% and the main refinancing rate to 2.65%. This move was in line with expectations and reflected the ECB’s updated inflation outlook, which signals easing price pressures Although domestic inflation remains elevated due to delayed wage and price adjustments, slowing wage growth and corporate profit absorption are helping to mitigate inflationary effects Eurozone inflation is projected to average 2 3% in 2025, 1 9% in 2026, and 2.0% in 2027, with core inflation gradually converging toward the 2% target.
• In February 2025, the Euro Area’s consumer price inflation rate declined by 0.2 percentage points to 2.3%, while core inflation eased to 2.6%, its lowest level since early 2022 On a monthly basis, consumer prices rose by 0 4% in February after a 0 3% decline in January
• Meanwhile, Germany’s GDP contracted by 0.2% in 2024, following a 0.3% decline in 2023. The downturn was largely driven by a 3% drop in manufacturing output, with key industries such as machinery and automotive experiencing significant declines.
Eurozone main refinancing operations rate, %
• In February 2025, the annual inflation rate in the U.S. eased to 2.8% from 3% in January, coming in below the expected 2.9%. Core inflation also slowed to 3.1%, marking its lowest level since April 2021, down from 3 3% and underperforming the 3 2% forecast On a monthly basis, core inflation fell more than expected to 0 2% from 0 4%, against predictions of 0 3%
• Meanwhile, the U.S. unemployment rate edged up to 4.1% in February from 4.0% in January, slightly surpassing market expectations.
• The yield on the U.S. 10-year Treasury note remained around 4.3% on March 25 as investors evaluated economic data, Federal Reserve statements, and potential tariff effects. Consumer confidence continued to weaken for the fourth consecutive month in March, with future expectations dropping to a 12-year low and financial outlooks at their weakest since July 2022. However, U.S. business activity gained momentum, as a strong rebound in services helped offset renewed weakness in manufacturing.
Source: Trading Economics
US 10 year Bond evolution, %
Forecast- Hungary
Source: Colliers
