- Decision
- Lower
- Rate change
- 25 bps
- base rate
- 5.75%
The National Bank of Hungary (MNB) cut its base rate by 25 basis points to 5.75% with effect from 22 July 2026, saying inflation developments were more favourable than in the June baseline, the lower risk premium on domestic assets had persisted, and the macroeconomic outlook remained in line with the June forecast. The move followed a year in which the base rate was held at 6.50% from July 2025 to January 2026, then cut by 25 basis points in February to 6.25% and again in June to 6.00%. The overnight deposit rate was reduced to 4.75% and the overnight collateralised loan rate to 6.75%. June inflation fell to 1.7% and core inflation was unchanged at 2.0%, both below expectations and the June Inflation Report forecast, and the Council said price growth will stay below the 3% target for the rest of 2026 and throughout 2027 before returning to target in 2028 H1; domestically, industrial production and retail sales continued to increase in May, private sector wage dynamics slowed from previous years but real wages rose strongly, and unemployment remained low in international comparison. The Council also reiterated that stability in domestic financial markets, especially the foreign exchange market, helps anchor inflation expectations. Globally, investor sentiment remains shaped by escalating USA-Iran tensions, with oil and European gas prices rising in recent weeks, developed-market long-term yields high and higher over the past month, and markets expecting one more rate increase from both the European Central Bank and the Federal Reserve before year-end. Looking ahead, the Council said that if favourable developments persist it sees room to lower the base rate further through the summer while maintaining a positive real interest rate, with any continuation to be assessed on the basis of the September Inflation Report.
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.