Monetary Council of the National Bank of Hungary decided the central bank base rate

The Monetary Council of the National Bank of Hungary (NBH) decided to leave the central bank base rate unchanged at 6.50pc at a monthly policy meeting on Tuesday.

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.
“Geopolitical tensions, a volatile financial market environment, and risks to the outlook for inflation warrant the maintenance of tight monetary conditions,” the Council said in a statement issued after the meeting.

“Restrictive monetary policy contributes to the maintenance of financial market stability and the achievement of the inflation target in a sustainable manner by ensuring positive real interest rates,” the statement said. The rate-setters pointed to “significant uncertainty” surrounding the interest rate paths of major economies. “Risk aversion towards emerging markets and ongoing geopolitical tensions have increased upside risks to inflation in recent month. A careful and patient approach to monetary policy remains warranted,” the Council said.

At a press conference after the meeting Barnabás Virág, a central bank deputy-governor, said that global investor sentiment had been characterised by increasing uncertainty and volatility since the last monthly policy meeting in December and pointed to the need for maintaining disciplined and cautious monetary policy. He said keeping the base rate on hold was the only option discussed at the meeting and the decision was supported unanimously.
Virag said consumer prices and core inflation had risen faster than expected in December and incoming data suggested an increased risk of a higher inflation trajectory in 2025. He added that upside risks to inflation had increased in recent months due to risk aversion towards emerging markets and geopolitical conflicts.

He said a divergence in monetary policies of the US Fed and the ECB was expected in 2025, which could lead to increased risk aversion in emerging markets. He said maintaining financial market stability was “crucial” for inflation to return to the central bank target in a sustained manner. Strengthening the effectiveness of monetary policy transmission is justified to reach the inflation target again and to maintain financial market stability, he added.

Virág acknowledged a general improvement in the fundamentals of the Hungarian economy and said disinflation would resume from February onwards. Fielding questions, he noted that the base rate had remained on hold for the fourth month in a row and that the option for a rate cut had been taken off the agenda. The base rate may remain at the current level “for an extended period”, he added.

One comment

  1. Norbert

    “Mr. Virág, a central bank deputy-governor, … said consumer prices and core inflation had risen faster than expected in December (2025 – to 4.6 percent) and incoming data suggested an increased risk of a higher inflation trajectory in 2025”.

    Land of Milk and Honey, people! Hungary is the joint European Union leader for the highest key rate, together with Romania. And you really do not want to be the leader, in this area.

    https://uk.finance.yahoo.com/news/hungary-keeps-key-interest-rate-130010256.html?guccounter=1&guce_referrer=aHR0cHM6Ly9kdWNrZHVja2dvLmNvbS8&guce_referrer_sig=AQAAAML1XU_t2ODsOytqKl1Sza5ZcJE4RXS06uJ1qsmHZ5-hHTVuyrvuv75G-08a8cTX1OBnJOjQSJbucmKHNKhnFYiR1qXGdf1Iihb92soM_fUKdHlr8SSeiCHUlGN-5HG8EWFuuanQZ-6kdmh-8nt1mjozynq1Bbiv1Piy87xmMC8W

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