Central Bank leaves rates unchanged in April

Hold meets expectations: At its meeting on 28 April, Magyar Nemzeti Bank (MNB) decided to keep the Central Bank base rate unchanged at 6.25% for a second straight meeting, largely in line with market expectations.

Bank shifts to wait-and-see stance: Struggling industrial production, tame domestic inflation and low inflation expectations dissuaded the MNB from raising interest rates. On the other hand, upside risks to price pressures due to the Iran war, plus the need to support the domestic currency, deterred it from delivering a cut.

Rate cuts still possible this year: A majority of panelists continue to expect the MNB to cut rates by year-end, as inflation should average within the Bank’s 2.0–4.0% target range in 2026 as a whole, giving it scope to support the domestic economy. The rest of our panelists see interest rates ending the year at or above current levels due to commodity price shocks. The Bank is scheduled to reconvene on 26 May.

Panelist insight: ING’s Peter Virovacz and Zoltán Homolya commented: “If flows through the Strait of Hormuz return to normal by the summer, as we currently expect in our base case, our growth, inflation and foreign exchange trajectory suggests there will be room for a rate cut late in the third quarter. Therefore, we predict that the base rate will be 6.00% by the end of the year. However, if our 'long war' scenario plays out (30% chance), we believe that the forint would require additional support, and the [MNB] could follow the ECB's lead with the same number of rate hikes (most likely two) during the next couple of quarters.”

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