MNI NBH Review - July 2025: Hawkish Stance Maintained

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Executive summary:

• The National Bank of Hungary kept the base rate unchanged at 6.50% while maintaining a hawkish tilt to its communication, as was unanimously expected.
• The Monetary Council also decided to cut the RRR from 10% to 8%, with effect from August 1, but said that this does not imply a change in its tight stance on monetary policy.
• Among sell-side, views remain mixed over whether the NBH will have room to start a rate-cut cycle later in the year.

This month’s policy statement retained a cautious tone, reiterating that a “careful and patient” approach to monetary policy remains necessary, and was for the most part unchanged from June. The most notable part of the meeting came with the announcement of the tweak to the required reserve ratio for commercial lenders – which was cut to 8% from 10%, effective August 1 – although policymakers stressed that the change does not imply a shift in its tight stance on monetary policy, subduing market reaction.

Rhetoric regarding the inflation outlook was little changed. For the rest of the year, inflation is expected to stay above the tolerance band, while inflation expectations are noted to have remained at a high level. While mandatory and voluntary price restriction measures had a significant restraining effect (the NBH estimate that government interventions cut CPI by 1.5ppts in June), strong corporate repricings can still be observed outside their scope.