Central Bank stands pat in March

Rates remain stable at end-Q1: At its meeting on 25 March, the National Bank of Hungary (MNB) decided to leave all policy rates unchanged for the sixth consecutive meeting, with the base rate remaining at 6.50%. The decision was in line with market expectations and the first under the new MNB governor, Mihály Varga.

Geopolitical and trade risks continue to endanger price stability: The key domestic factors that dissuaded the Bank from delivering a cut included above-target inflation in February, a trend that the MNB expects to persist for the rest of the year. Additionally, the Bank pointed to upside risks to inflation stemming from trade and geopolitical tensions. On the flipside, the MNB downgraded its outlook for GDP growth in 2025, taking a rate hike off the table.

Panelists expect rate cuts to be delayed: The Bank struck a slightly more hawkish tone compared to prior months, stating that “the inflation path this year is likely to be higher than earlier expected, and achieving the target has been delayed”. As our Consensus is for inflation to average above the MNB’s 2.0–4.0% target this year, our panelists now expect interest rate cuts to resume in H2 2025—as opposed to their prior forecast of cuts in Q2—and see a little over 50 basis points of cuts by the end of the year. Stronger-than-expected inflation and currency depreciation pose upside risks to policy rates.

Panelist insight: Erste Bank’s Orsolya Nyeste said: “We maintain our view that later in the year, cautious rate reductions (one or two) cannot be excluded, but only if risk assessment factors improve and possible easing steps by major and regional central banks create some more room for the MNB to maneuver.” ING analysts Peter Virovacz and Kinga Havasi held a more hawkish view: “We think it is safest to assume that the policy rate will remain at 6.50% for the rest of the year. We do not completely rule out the possibility of a deviation from this towards the end of the year, but the chances of this happening are rather low, given the inflation risks.”

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 25 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.

Download one of our sample reports to visualize what a Consensus Forecast is and see our Hungarian interest rate projections.

Want to get access to the full dataset of Hungarian interest rate forecasts? Send an email to info@focus-economics.com.