Macro Newsletter June 2025
Hungary Holds Interest Rate Steady Amid Inflation and Global Uncertainty
In May, the National Bank of Hungary kept its key interest rate unchanged at 6.50% for the eighth consecutive meeting, in line with market expectations. The decision reflects the continued cautious stance, as inflation remains close to the upper limit of its tolerance band. Global economic uncertainty, driven by U S tariffs and potential retaliatory measures from other major economies, also supports the case for holding rates steady. While a weaker forint and higher tariffs could increase inflationary pressure, falling global energy prices are expected to ease cost burdens for domestic firms.
Hungary’s annual inflation rate slowed to 4.2% in April 2025, down from 4 7% in March, marking the lowest rate since November 2024. Price growth eased in several categories, including food (5.4% vs. 7% in March), services (7% vs. 7.5%), and consumer
durables (2% vs. 2.1%). Core inflation which excludes volatile items such as food and energy also declined, falling to a four-month low of 5% from 5.7% in the previous month.
Industrial producer prices rose by an average of 7 9% year-on-year in April 2025 Domestic output prices increased by 3.9%, while non-domestic output prices rose by 9.9% compared to April 2024. The price increases were primarily driven by the weakening of the forint against the euro and rising production costs On a monthly basis, domestic output prices decreased by 1.0% and non-domestic prices by 0.1%, resulting in an overall decline of 0.4% in industrial producer prices, according to the Central Statistical Office (CSO)
Hungary’s Industrial Production Stagnant, Retail Sales Growth Slows
• Hungary’s industrial production stagnated in March 2025 compared to the same month a year earlier, following an 8 7% year-on-year decline in February The latest figure was in line with market expectations. Within the key manufacturing subsectors, output increased notably for computer, electronic, and optical products (+15.6%), transport equipment (+2.8%), and food products. However, these gains were offset by a sharp decline in the production of electrical equipment, which fell by 20.5%.
• Retail sales rose by 0.4% year-on-year in March 2025, based on calendar- and Easter-adjusted data This marked a significant slowdown from the 3 3% growth seen in February and represented the weakest increase since December 2024. The moderation was driven by slower growth in sales of food, beverages, and tobacco (+1.2% vs. +3.5% in February), as well as automotive fuel (+0.1% vs. +0.4%). In contrast, non-food product sales accelerated, rising by 5 9% compared to 5 0% in February. The strongest growth was recorded in textile, clothing, and footwear; pharmaceutical and medical products; perfumery; and furniture and technical goods stores. Over the January–March 2025 period, retail turnover was 2.7% higher compared to the same period a year earlier.
• As of June 2, Hungary’s 10-year government bond yield stood at 6.96%, reflecting a stable base rate environment amid continued market uncertainty.
EUR/HUF ex. rate (2020-2025)
Source: Trading economics
Energy market
European Gas Prices Rebound, Oil Edges Higher Amid Supply and Geopolitical Concerns
European natural gas futures surged by 10% in May to €35.2/MWh, rebounding after three consecutive months of declines. Hopes for the resumption of Russian gas flows have diminished, as the war in Ukraine shows no signs of resolution. Meanwhile, the EU continues to advance its energy diversification strategy, with Germany maintaining a firm stance against restarting the Nord Stream pipelines.
On the supply side, some LNG cargoes are being redirected to the Middle East due to rising regional demand, complicating Europe’s efforts to replenish storage levels ahead of the next winter season.
Brent crude oil futures rose over 2% to approximately $64.50 per barrel on June 2, following OPEC+’s announcement that it will increase output in July by the same volume as in the past two months. This eased market fears of a more substantial supply boost Ongoing geopolitical tensions continue to lend upward pressure to oil prices
Brent oil price (USD/Bbl)
EU DUTCH TTF Gas Price (EUR/MWh)
Eurozone
ECB Eyes Further Rate Cuts, While German Industry Rebounds
Although recent trade tensions and U.S. tariffs are expected to weigh on economic growth, European Central Bank (ECB) officials still see a clear path toward achieving price stability, as disinflationary forces are likely to dominate in the near term However, some policymakers have warned that a prolonged trade conflict could have longer-term inflationary effects by disrupting global supply chains
At its April meeting, the ECB delivered its seventh interest rate cut in the past year and is widely expected to ease policy again on June 5 Markets are currently pricing in a 90% probability of another rate reduction. Investors also anticipate one additional cut later in the year, after which the ECB’s deposit rate is projected to stabilize around 1 75%
The annual inflation rate in the Euro Area was confirmed at 2 2% in April 2025, slightly above the
ECB’s 2.0% target midpoint. Core inflation, which excludes food and energy, rose to 2.7%, up from March’s three-year low of 2.4%. On a monthly basis, consumer prices increased by 0 6%, matching the pace seen in March
Meanwhile, Germany’s industrial production rose sharply by 3 0% month-over-month in March 2025, rebounding from a 1 3% decline in February and significantly exceeding market expectations of a 0.8% increase. It was the second monthly gain this year and the strongest rise since October 2021 The recovery was driven by robust output in the automotive sector (+8.1%), pharmaceuticals (+19.6%), machinery and equipment (+4.4%), and construction (+2.1%). On a year-on-year basis, industrial output fell by just 0 2%, a notable improvement from February’s 4 0% decline and the smallest annual drop since November 2022.
U.S. Inflation Eases, Labor Market Remains Steady Amid Rising Trade
• The annual inflation rate in the U S eased to 2 3% in April 2025, the lowest level since February 2021, down from 2 4% in March and below market expectations of 2 4% Gasoline and fuel oil prices declined at a faster pace, while natural gas prices surged by 15.7%, up from 9.4% in the previous month. In contrast, prices rose more sharply for used cars and trucks (+1.5% vs. +0.6%) and for new vehicles (+0.3% vs. 0%). Meanwhile, the annual core inflation rate which excludes food and energy held steady at 2 8%, in line with forecasts.
• The U.S. unemployment rate remained unchanged at 4.2% in April 2025, matching March’s figure and meeting ratio improved slightly to 60% from 59 9% market expectations. The number of unemployed individuals rose by 82,000 to 7.165 million, while total employment increased by 436,000 to reach 163.944 million. The labour force participation rate edged up to 62.6% from 62.5%, and the employment-population
• The yield on the U.S. 10-year Treasury note held steady at 4.43% on June 2, as investors weighed the potential economic fallout from renewed global trade tensions. On May 30, President Donald Trump announced plans to double tariffs on steel and aluminium imports to 50% starting June 4, drawing criticism from major trade partners China rejected Trump’s accusation of violating a recent trade agreement reached in Geneva, further clouding the outlook for a near-term call between Trump and Chinese President Xi Jinping.
Forecast- Hungary
Source: Colliers
