Hungary Interest Rate

Central Bank begins to cut rates in June

Cut aligns with market expectations: On 23 June, Magyar Nemzeti Bank (MNB) cut the base rate from 6.25% to 6.00% after having stood pat for three consecutive meetings. The reduction was widely anticipated by markets but contrasted recent hikes by the ECB and regional peers, such as the Czech Republic.

Low inflation and a strong forint make room for a cut: Inflation fell below the floor of the MNB’s 2.0–4.0% target in May and the forint remained at one of its strongest levels in recent years through mid-June, partly thanks to the unblocking of EUR 16.4 billion of EU funds in late May, in turn helping keep a lid on import costs and shoring up investor sentiment. These developments allowed the MNB to cut the policy rate, unlike regional peers plagued by surging inflation amid the Iran energy crisis.

Further rate cuts likely this year: The MNB stated that it “sees room for further interest rate cuts throughout the summer”. In line with this, most of our panelists have penciled in further rate cuts by December; our Consensus is for the base rate to end 2026 at a five-year low. Inflation is projected near the MNB’s target mid-point in 2026 on average, supported in part by a strong forint, which should give the MNB enough room to loosen its monetary stance in the second half of the year. Still, uncertainty remains, with upside risks to the base rate stemming from prolonged commodity price spikes—particularly linked to the Iran war—and sharper-than-expected rate hikes by the ECB. The MNB is scheduled to reconvene on 21 July.

Panelist insight: ING analysts commented: “We expect further rate cuts for the rest of the year, given the positive developments seen in recent months. Our current base case is a total of 75bp, but given the latest developments, we are leaning towards a total of 100bp easing overall. […] According to our calculations, inflation is likely to remain below 4% for the rest of the year, remaining within the central bank’s tolerance band all year. […] Stronger domestic demand, supported by fiscal stimulus, real wage growth and improved sentiment, could fuel inflation over the monetary policy horizon. The not-so-remote possibility of rising oil prices, coupled with the imminent lifting of the fuel price cap and a more hawkish Federal Reserve, could also raise some concerns among members of the Monetary Council.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Hungarian interest rate projections for the next ten years from a panel of 29 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Hungarian interest rate.

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