Hungary: Central Bank stands pat in May
Hold aligns with market expectations: On 26 May, Magyar Nemzeti Bank (MNB) left the base rate unchanged at 6.25% for a third straight meeting, as anticipated by markets.
Inflation remains contained but global risks keep MNB cautious: The decision to hold rates was driven by two factors. Inflation remained below the midpoint of the MNB’s 2.0–4.0% target in April, and the forint has strengthened, helping reduce the costs of imports. Still, the MNB demurred from a cut amid persistent geopolitical tensions and the risk that higher global energy prices could still push inflation up.
Rate cuts still possible this year: The Bank’s forward guidance remained cautious but hinted that sustained favorable inflation trends could allow for gradual rate cuts. Most of our panelists expect inflation to remain within the MNB’s target range in 2026 on average, supported in part by a strong forint, and so they project the MNB to cut again by the end of this year, pushing the base rate to a five-year low.
Still, uncertainty remains, with upside risks to the base rate stemming from persistent commodity price pressures—particularly linked to the Iran conflict—and possible tightening by the ECB.
The Bank is scheduled to reconvene on 10 June.
Panelist insight: ING’s Peter Virovacz commented:
“We would not rule out a rate cut or a rate hike later this year; the direction will depend on how the geopolitical situation evolves and whether the Hungarian forint can strengthen significantly.”