MNI NBH Preview - May 2025: Another Cautious Hold

Donwload Full Report Here

Executive Summary:

• The National Bank of Hungary is expected to keep its base rate on hold at 6.50% again this month, despite a further slowdown in headline inflation in April.
• Comments from central bank officials continue to indicate that it is highly unlikely that any changes will be made to the Bank’s hawkish guidance either, with officials committed to anchoring inflation expectations.
• Among sell-side, no analyst we have surveyed expect to see any change to rates this month, with some still expecting the base rate to remain unchanged for the remainder of the year given the unstable risk backdrop. 

Last month’s decision to keep the base rate unchanged at 6.50% was well anticipated. The policy statement retained a cautious tone, reiterating that a careful and patient approach to monetary policy remains necessary, while Governor Varga said the Bank may keep its key rate at current level for “sustained” period. Notably, last month’s statement removed reference to “overall upside risks to inflation”. Instead, risks are now perceived as being two-sided, with lower commodity prices potentially supporting lower inflation on the one hand, while tariff hikes and rising uncertainty across financial markets poses upside risks on the other.

Annual consumer price growth slowed from +4.7% Y/Y in March to +4.2% in April, a touch above expectations of a more substantial decline to +4.0% – which would have placed the rate at the top end of the NBH’s target range. The central bank had noted that inflation was expected to fall further in April and then remain near the upper bound of the central bank tolerance band in the coming months.