Hungary's 2022-23 inflation surge and forint depreciation

Hungary's annual average consumer price inflation reached 14.5% in 2022 and then 17.6% in 2023, among the highest rates in the European Union, as energy-price pass-through from the war in Ukraine combined with a weakening forint and lingering fiscal stimulus from the pandemic years. The Magyar Nemzeti Bank's own June 2023 Inflation Report traced part of the 2022 surge directly to currency weakness, estimating that without the forint's depreciation that year, headline inflation would have been roughly 8%, meaning the exchange-rate move itself added close to 7 percentage points. The MNB had already begun tightening in June 2021, well ahead of many regional peers, and continued raising its base rate through 2022 into double digits while deploying a one-day deposit facility to narrow the gap between official and effective rates. By 2023 the relationship reversed: as confidence returned and the forint strengthened, the central bank calculated that currency appreciation shaved roughly 2 percentage points off domestic inflation that year. Headline inflation fell back to 3.6% by February 2024, and the IMF credited the MNB's early, sustained tightening cycle for containing what could otherwise have been a far more persistent price spiral.