Hungary: Central Bank leaves rates unchanged in July
Another hold, as expected: At its meeting on 22 July, the Magyar Nemzeti Bank (MNB) decided to leave its base rate at 6.50%, as has been the case since September 2024. The MNB’s decision was in line with market expectations and cemented Hungary as the EU member with the joint-highest interest rates.
Household inflation expectations remain unanchored: The MNB noted that inflation remained above its 2.0–4.0% target range for the seventh consecutive month in June, and expects this trend to continue through the rest of the year due to robust private consumption and strong wage growth. Most importantly, household inflation expectations remained high in June—even as corporate price expectations declined to their lowest level since October 2024—highlighting the need for tight monetary conditions to fully anchor expectations. The MNB also decided to keep its policy rate unchanged because of upside risks to inflation, including elevated price pressures in the services sector, potential upticks in global food prices and the impact of global trade frictions on inflation expectations.
The Consensus remains for rate cuts by year-end: The MNB determined that maintaining tight monetary conditions is “warranted”, showing no change in its forward guidance from the previous meeting. A majority of our panelists see room for monetary policy easing this year, penciling in 25–100 basis points of cuts by December, while a growing minority sees the Bank on hold. Higher-for-longer inflation and a weaker-than-expected forint could delay interest rate cuts. The Bank will reconvene on 26 August.
Panelist insight: János Nagy, analyst at Erste Bank, noted:
“Market pricing currently indicates at least one rate cut for the remainder of the year. Our expectation is that, if developed market and regional interest rates progress according to the current forecasts, then we can still see [the] possibility of a rate cut at the end of the year.”
On a more hawkish note, ING analysts said:
“Our long-standing view is that underlying inflation in Hungary is too high. While the mandatory and voluntary price shield measures are helping in the short term, underlying price dynamics remain an issue from a monetary policy point of view. […] We believe it is safest to assume that the policy rate will remain at 6.50% for the rest of the year. Although we do not rule out the possibility of a deviation from this towards the end of the year, it is unlikely given the inflation risks.”