Policy Makers Leave Base Rate on Hold at 6.50%

The Monetary Council of the National Bank of Hungary (MNB) decided to leave the central bank base rate unchanged at 6.50% at a monthly policy meeting on Tuesday.

The Council also left the O/N deposit rate at 5.50% and the O/N collateralised loan rate at 7.50%. The rates mark the ends of the central bank's symmetric interest rate corridor.

In a statement released after the meeting, the Council said the decision to keep the base rate on hold was taken "in line with the stability-oriented approach."

The Council affirmed its commitment to achieving the inflation target in a sustainable manner and said maintaining tight monetary conditions was warranted.

"The Council is constantly assessing incoming macroeconomic data and factors influencing the inflation outlook, in particular repricings at the start of the year and the stability of financial markets, based on which it will take decisions on the level of the base rate in a cautious and data-driven manner from meeting to meeting," the policy makers said.

"Monetary policy contributes to the maintenance of financial market stability, the anchoring of inflation expectations consistently with the central bank target and, as a result, to the achievement of the inflation target in a sustainable manner by ensuring positive real interest rates," they added.

Addressing the central bank's latest quarterly Inflation Report, discussed at the meeting, the Council said the consumer price index remained "volatile", but underlying inflation was projected to evolve more favourably over the coming year compared to the September forecast due to a stronger forint and an improved external cost environment.

The fresh report puts average annual inflation at 4.4% in 2025, 3.2% in 2026 and 3.3% in 2027.

Speaking at a press conference after the meeting, central bank governor Mihály Varga said a "careful" and "patient" monetary policy approach was justified.

Commenting on the fresh quarterly Inflation Report, to be published in full on Thursday, Varga said underlying inflation was moderating and the average annual inflation forecasts for 2025 and 2026 had been lowered. The fresh report shows headline inflation falling under the 3% target early in 2026, then temporarily rising close to the upper edge of the +/-1pp tolerance band, he added.

The inflation target could be achieved in a sustainable manner in the second half of 2027, he pointed out.

Varga noted that corporate price adjustments at the start of 2026 as well as the timing and impact of the rollback of price restrictions were reason for uncertainty with regard to the inflation outlook.