The National Bank soothes the markets with its latest base rate decision

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.

In a statement released after the meeting, the Council said the decision was taken “in line with the stability-oriented approach” and highlighted the need for a “careful and patient” approach to monetary policy due to risks to the inflation environment as well as trade policy and geopolitical tensions.

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Stability, inflation

“In the Council’s assessment, maintaining tight monetary conditions is warranted,” they said.

“Restrictive monetary policy contributes to the maintenance of financial market stability, the anchoring of inflation expectations consistently with the central bank target and, as a result, to the achievement of the inflation target in a sustainable manner by ensuring positive real interest rates,” the policy makers added.

The Council said that a subsidised credit scheme for first-time home buyers along with other home purchases subsidies could help boost retail lending stock by 17-20pc in 2025 and 18-22pc in 2026. Corporate lending stock could edge up by 2pc in 2025 and in 2026, they added.

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The Council noted that the capitalisation and liquidity position of the Hungarian banking system was strong and “capable of satisfying even a signficantly greater credit demand”.