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Inflation at 39 year low

September 13th, 2013

The leading left-wing daily contends that despite the record low overall inflation rate, Hungarian families have to spend more on basic goods. A pro-government columnist, on the other hand, believes the low inflation rate proves that the government is on the right path.

On Thursday, the Hungarian Central Statistical Office reported that inflation had slowed to 1.3 per cent on a year-on-year basis in August. The inflation rate has for five consecutive months remained under 2 per cent. The yearly inflation rate of 1.3 is the lowest since 1974.

While the overall inflation rate has indeed hit a record low, basic goods have become significantly more expensive, Népszabadság comments in a front page editorial. The price of staple food, alcoholic drinks as well as tobacco products have increased steeply – only clothing and household items have become cheaper, the left-wing daily contends. Through utility and energy tariff cuts, the government can keep the overall inflation rate low until the elections (see BudaPost September 10), but this will not compensate Hungarian families for the rise of the price of basic goods. After the elections, Hungarians will have to pay the price of those utility tariffs now kept artificially low by the government, Népszabadság concludes.

Despite such ‘fearmongering’ on the left, the Orbán government has managed to cut the inflation rate, Anna Szabó writes in Magyar Nemzet. The pro-government columnist finds it bizarre that the post-Communist left which in 2002 promised to keep energy prices under control should accuse the Orbán government of enacting populist anti-market policies reminiscent of the Kádár era. The statistics, however, show that base rate cuts under National Bank president György Matolcsy have not resulted in uncontrollable inflation, Szabó points out. The Socialists blame the government for not being bold enough in cutting energy and utility prices, while Liberals fear that lower tariffs will undermine the position of energy-providers. Szabó, however, believes that the Orbán government is acting in a responsible manner, in marked contrast to past Socialist-Liberal coalitions, which filled the holes in their budgets by inducing a higher inflation rate and thus devaluing wages. Low inflation means price stability as well as lower interests rates, which help the government to offer loans at a favorable rate for Hungarian entrepreneurs, in order to boost economic output, Szabó maintains. On Thursday, National Bank president György Matolcsy announced that the National Bank would prolong the lending program started earlier this year. Mr Matolcsy said that in addition to the 750 billion Forints committed so far, another 2,000 billion Forints will be allocated till the end of 2014. Commercial banks will get the loans at a zero per cent interest rate, and will transmit them to customers at the maximum interest rate of 2.5 per cent.

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