Hungary halts rate cuts amid inflation surge

The Central Bank of Hungary (MNB) decided on Tuesday to keep the base rate unchanged at 6.75 per cent for the first time in over a year, following a rise in inflation and a decline in the forint.

The forint strengthened by 0.3 per cent following the rate decision, trading at 393.1 against the euro at 2:08 p.m. local time. Despite this, it remains down 2.5 per cent against the euro since the beginning of the year.

Despite historically high foreign exchange reserves and a persistent current account surplus, recent volatility in financial markets and increased geopolitical tensions pose risks to inflation and economic growth.

The Monetary Council’s stability-focused monetary policy also left the overnight deposit rate at 5.75 per cent and the overnight collateralised borrowing rate at 7.75 per cent.

Looking ahead, the Council remains open to cautiously lowering interest rates based on global central bank policies, domestic inflation trends, and Hungary’s risk perception, while continuing to closely monitor macroeconomic data and market conditions.