Hungary: Central Bank leaves rates unchanged in March
Rates remain at multi-year low: At its meeting on 24 March, the Central Bank of Hungary (MNB) decided to keep its base rate at 6.25% after reducing it by 25 basis points in February. As such, the base rate remained at its lowest level in nearly four years. Markets had priced in the hold.
Heightened geopolitical risks prompt caution: The MNB hit the brakes on policy easing due to heightened geopolitical tensions, notably the Iranian conflict, which significantly raised global energy prices and upside inflation risks, potentially impacting domestic financial stability and growth prospects. Still, the Bank did not hike rates, as both headline and core inflation eased in February, driven by lower global food prices, a stronger forint and subdued price expectations among both companies and households.
Additional rate cuts likely this year: In its forward guidance, the MNB shifted its guidance from previous meetings, noting that “a careful and patient approach to monetary policy remains necessary due to inflation risks arising from geopolitical tensions and the uncertain financial market environment”. Most of our panelists expect a further 25–125 basis points of cuts by the end of 2026, as inflation should average within the 2.0–4.0% target, while GDP growth will likely be sluggish, curbed by volatile investor sentiment, persistent consumer pessimism and political uncertainty ahead of parliamentary elections in April. Risks are tilted to the upside and stem mainly from a prolonged increase in energy prices due to the Iran war, which could prompt rate hikes by the ECB, pressuring the MNB to follow suit.
The MNB should reconvene on 28 April.
Panelist insight: ING’s Peter Virovacz and Zoltán Homolya said:
“Unsurprisingly, in light of the war in the Middle East and related market turmoil, the National Bank of Hungary has reverted to a hawkish stance. We agree with the central bank’s view that it is too early to press the panic button. If our base case holds (40% chance) and the impact of energy prices fades as expected, inflation will remain mostly within the central bank’s tolerance band. This could pave the way for monetary policy easing in the second half of 2026, following a lengthy pause. However, if our ‘long war’ scenario plays out (30% chance), we believe that the forint would require additional support, and the NBH could follow the European Central Bank’s lead with the same number of rate hikes (most likely two) during the next couple of quarters.”