- Decision
- Maintain
- Rate change
- 0 bps
- base rate
- 6.5%
The Monetary Council of the Magyar Nemzeti Bank (MNB) kept the base rate at 6.50 % on 22 July, leaving the overnight deposit and lending rates at 5.50 % and 7.50 %, respectively, citing still-elevated inflation, buoyant consumption, strong wage dynamics and persistent trade- and geopolitics-related risks as reasons to preserve a tight stance. The decision prolongs the steady 6.50 % policy rate maintained since at least January 2025. To fine-tune liquidity, the Council will lower the required reserve ratio to 8 % from 10 % on 1 August, judging the move neutral for monetary transmission and consistent with restrictive conditions. Headline inflation edged up to 4.6 % in June while core inflation eased to 4.4 %; both are projected to remain above the 3 ±1 pp target band for the rest of 2025 before converging to 3 % in early 2027. GDP stagnated in Q1 and high-frequency data signal subdued Q2 output as investment stays weak, though solid household consumption, rising real wages and a prospective export rebound are expected to foster gradual recovery from H2; the unemployment rate remains low but wage growth has moderated. The current-account posted a EUR 69 mn deficit in May, and a brief narrowing of the surplus is foreseen this year ahead of improvement from early 2026. Globally, tariff disputes and geopolitical tensions dominate market sentiment, with investors anticipating two 25 bp Fed cuts and one ECB cut by year-end. Reaffirming a “careful and patient” approach, the Council stressed that tight monetary conditions and positive real rates are essential to anchor expectations and ensure a durable return of inflation to target.
Rate evolution
From May 2025 to September 2026, the National Bank of Hungary lowered the central bank base rate by 100 basis points to 5.50%, holding it at 6.50% for most of the period before a February 2026 cut, a pause through May, 25-basis-point reductions in June, July and August, and a hold in September. The long hold reflected inflation above the tolerance band, persistent market services and core pressures, strong corporate repricing, high household inflation expectations and a desire to preserve tight conditions amid tariff, trade and geopolitical tensions, while growth stayed weak outside consumption. Through late 2025, the Monetary Council saw mostly upside risks to inflation and downside risks to growth, but by December and January it judged the inflation outlook balanced as disinflation broadened and the stronger HUF improved costs, despite uncertainty over start-of-year repricing and price restrictions.
After cutting in February because favourable underlying inflation and stable financial markets allowed it, the National Bank of Hungary held the central bank base rate at 6.25% from March to May as Iran-related energy shocks and global uncertainty revived upside inflation risks, even as inflation moved near the lower bound of the tolerance band. It then cut the rate to 6.00% on 23 June as the June forecast showed a significantly improved inflation outlook and balanced inflation risks, before reducing it to 5.75% on 21 July after June inflation fell to 1.7% and core inflation held at 2.0%, below the forecast, while slower food price growth and a persistently lower risk premium on domestic assets preserved room to manoeuvre despite escalating USA-Iran tensions and higher oil and European gas prices. The Monetary Council cut the central bank base rate by a further 25 basis points to 5.50%, effective from 26 August, and held it at that level at its 22 September meeting.