Breaking – Hungarian National Bank cut base rate after 1.5 years

The Monetary Council of the National Bank of Hungary (NBH) decided to cut the central bank base rate by 25bp to 6.25pc at a monthly policy meeting on Tuesday.

Base rate cut weeks before the elections

The Monetary Council of the National Bank of Hungary (NBH) decided to cut the central bank base rate by 25bp to 6.25pc at a monthly policy meeting on Tuesday, the Hungarian News Agency wrote.

According to Telex, the base rate cut comes after a 1.5-year hiatus. The National Bank—under different leadership—last trimmed the rate in September 2024, from 6.75 per cent to 6.5 per cent. The outlet noted that markets had anticipated the move, so experts expect minimal impact on the Hungarian forint’s exchange rate. At present, €1 buys 379.15 forint, while $1 fetches 322.12 forint.

Analysts reckon that base rate cuts exert less influence on the forint than April’s general election.

Forint may strengthen if Péter Magyar wins

Péter Virovácz of ING predicts that if Viktor Orbán retains power, the forint will weaken by 10 per cent. A Tisza Party victory, by contrast, could strengthen it by the same margin.

Telex reports that the Hungarian National Bank may deliver two further 25bp cuts this year—but only if markets react positively to the election outcome.

Mihály Varga, the bank’s governor and former finance minister, stressed at today’s press conference that forint stability remains paramount. He hailed January’s benign inflation of 2.1 per cent, which paved the way for the cut, noting that food prices fell outright while goods prices dropped 3 per cent.

The labour market, Varga said, remains robust, with unemployment steady. Yet he cautioned that today’s decision does not signal the onset of an easing cycle. Future moves by the bank’s Monetary Council will hinge purely on incoming data.

If you missed our previous articles:

• Lessening pressure? Inflation in Hungary is at an 8-year low
• Péter Magyar: National Bank Governor Varga was unwilling to surrender to mafia boss PM Orbán