Hungary's central bank, the Magyar Nemzeti Bank (MNB), paused its interest rate cutting cycle in September 2026, leaving its base rate at 5.50%. This decision came after inflation developments were consistently below the MNB's baseline projections. Governor Mihály Varga stated that the future path of the base rate would be determined based on the September Inflation Report, emphasizing the importance of maintaining financial and foreign exchange market stability.
Despite analysts' expectations of further cuts, particularly given July's inflation rate of 1.2% (the lowest since January 2017), the MNB opted for caution. This stance was partly influenced by the need to monitor global rate hikes and external market conditions. The central bank had previously signaled room for easing during the summer, reducing the benchmark rate by 25 basis points in August.
The MNB also announced a review of its inflation target, which began in spring 2026, with the conclusion to be announced in the autumn. This review, along with Hungary's fiscal path and expectations regarding euro adoption, will be key factors influencing the country's risk assessment. The MNB's communication was seen as modestly supportive for the Hungarian Forint.
While some analysts, like ING, had forecast a terminal rate of 4.75% for the year and continued easing, the MNB's decision in September suggests a more cautious approach. The central bank aims to ensure a positive real interest rate and anchor inflation expectations. The stability of the foreign exchange market is also a priority to achieve price stability.
