Central Bank Holds Rate Steady
The Magyar Nemzeti Bank (MNB), Hungary's central bank, announced on Tuesday, September 23, 2025, its decision to maintain the benchmark base rate at 6.5%. This move, widely anticipated by economists, extends a year-long period during which the MNB has refrained from easing its monetary policy. The 6.5% rate remains the highest among European Union member states, shared with Romania.
Monetary Council's Rationale
The MNB's Monetary Council, responsible for setting the country's monetary policy, cited a 'stability-oriented approach' as the primary driver behind the decision. The Council emphasized its commitment to achieving the inflation target in a sustainable manner and underscored that maintaining tight monetary conditions is crucial. This stance is warranted due to persistent risks within the inflation environment, coupled with broader trade policy and geopolitical tensions. Governor Mihály Varga has previously stated that 'the fight against inflation is not over,' highlighting the central bank's focus on anchoring inflation expectations and ensuring positive real interest rates.
In addition to the base rate, the MNB also kept the overnight deposit rate at 5.5% and the overnight collateralized loan rate at 7.5%. These rates define the boundaries of the central bank's symmetric interest rate corridor.
Inflationary Pressures and Economic Outlook
Hungary continues to grapple with elevated inflation. The annual inflation rate stood at 4.3% in August 2025, remaining unchanged from the previous month and exceeding the MNB's 2-4% tolerance band. This figure positions Hungary's inflation as the second-highest in Central Europe, trailing only Romania. The central bank projects that inflation will likely remain above its target band throughout 2025, with a gradual return to the desired range expected in early 2026 and reaching the 3% target by early 2027.
The economic growth outlook for Hungary has seen downward revisions. The MNB's updated forecast for 2025 GDP growth is now at 0.6%, reflecting a subdued economic performance, including a 0.1% year-on-year growth in the second quarter of 2025. While a recovery is anticipated from 2026, supported by increased consumption, investment, and exports, the immediate future remains challenging. The Hungarian forint recently reached a 15-month high, partly due to the attractive interest rate differential and Governor Varga's comments against currency devaluation.
Looking Ahead
The MNB's consistent decision to hold the base rate at 6.5% for the eleventh consecutive meeting underscores its cautious approach to monetary policy. The central bank's forward guidance continues to emphasize patience and predictability, indicating that any future easing will depend on a sustained disinflationary trend. Policymakers remain vigilant regarding global economic uncertainties and domestic price risks, signaling a continued commitment to price stability.
5 Comments
Noir Black
This stifles all economic growth! Businesses are suffering.
KittyKat
Patience is key here. Stick to the plan to beat inflation for good.
Loubianka
It's good to see the Forint strengthen due to these rates, which helps with import costs. Yet, the overall economic slowdown suggests a difficult path ahead for average Hungarians.
Raphael
The 'stability-oriented approach' makes sense given the persistent inflation risks. But one has to wonder if this cautiousness is now becoming too restrictive, potentially delaying the much-needed economic rebound.
Donatello
Maintaining stability is important, especially with global uncertainties, but a 0.6% GDP growth forecast for 2025 is concerning. We need more than just price control.