Policymakers release first base rate decision under new Central Bank Governor

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 official site said the rates mark the ends of the central bank’s symmetric interest rate corridor.

At a press conference after the meeting, Mihály Varga, the new central bank governor, said tight monetary conditions were warranted, adding that a “careful” and “patient” approach to monetary policy was necessary. He said the inflation path in 2025 was likely to be higher than earlier expected and achieving the 3.0pc inflation target had been delayed. He also pointed to upside risks to inflation as well as trade policy and geopolitical tensions. Varga said that restrictive monetary policy contributed to the achievement of the inflation target in a sustainable manner by ensuring positive real interest rates. He added that the base rate could remain at its current level for “an extended period”.

He said headline CPI would fall back into the NBH’s 3.0pc +/-1pp tolerance band at the beginning of 2026 and approach the 3.0pc target by year-end. In its fresh quarterly Inflation Report, discussed at the policy meeting on Tuesday, the NBH put average annual inflation at 4.5pc–5.1pc in 2025 and at 2.9pc–3.9pc in 2026. The central bank forecast GDP growth of 1.9pc-2.9pc in 2025 and 3.7pc-4.7pc in 2026 in the report.

Varga said expanding consumption could be the engine of growth in 2025, supported by real wage growth and tax cuts. Big investments in industrial capacity started in recent years could start operating at the end of 2025 or in 2026, he added.

He said external demand was set to remain weak in the short term, but a pickup in Europe could boost Hungary’s exports in the mid-term.