The Council also left the O/N deposit rate at 5.50pc and the O/N collateralised loan rate at 7.50pc. The rates mark the ends of the central bank's symmetric interest rate corridor.

In a statement released after the meeting, the Council said the decision to leave the base rate on hold was taken in line with its "stability-oriented" approach.

"A careful and patient approach to monetary policy remains necessary due to risks to the inflation environment as well as trade policy and geopolitical tensions," the Council added.
 

Commenting on the NBH's latest quarterly Inflation Report, which was discussed at the meeting, the Council said CPI was expected to stay above the central bank's 3.0pc +/-1.0pp tolerance band for the rest of 2025.

"In the medium term, with buoyant consumer demand, volatile commodity market movements and persistently strong wage dynamics, the inflation target can be achieved in a sustainable manner by ensuring tight monetary conditions," the policy makers said.

They added that the inflation rate could "decline persistently" to the tolerance band in early 2026 and reach the 3pc inflation target in early 2027.

The Inflation Report puts average annual inflation at 4.7pc for 2025 and 3.7pc for 2026.

The central bank expects a gradual recovery in H2 2025 and puts full-year GDP growth at 0.8pc. It projects GDP growth of 2.8pc in 2026.

The Council said the baseline scenario in the report was surrounded by mostly upside risks to inflation and downside risks to growth.

At a press conference after the meeting, central bank governor Mihaly Varga affirmed policy makers' commitment to achieving the inflation target in a sustainable manner. He added that a "careful and patient" approach to monetary policy was warranted.

He said maintaining financial market stability and anchoring inflation expectations were of "key importance".

The Council's forward guidance remains unchanged, he added.

Commenting on domestic macroeconomic developments, Varga said growth in household consumption was "vigorous", but the decline in investments was "prolonged".

He said that mandatory and voluntary price restrictions had played a "significant" role in mitigating inflation, but also highlighted "strong repricing" among companies.

Varga said incoming macroeconomic data had been within the NBH's forecast range. He added that households' inflation expectations had diminished but were still high.

He said the NBH could contribute to anchoring inflation expectations and achieving the inflation target in a sustainable manner by "ensuring a positive real interest rate".

Full report available here
 

Source: MTI – Hungary’s national news agency since 1881. While MTI articles are usually factual, some may contain political bias, and readers should be aware that such content does not reflect the position of XpatLoop, which is neutral and independent.

Since the goal of XpatLoop is to keep readers well briefed, right across the spectrum of opinions, MTI items are shared to ensure readers are aware of all narratives within the local media.

XpatLoop believes in empowering readers to form their own views through complete and comprehensive coverage. To facilitate this XpatLoop has a balanced range of news partners, as you can see when you surf around XpatLoop.com

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