MNI NBH Review - June 2025: A Ninth Consecutive Hold
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Executive summary:
- The National Bank of Hungary kept its base rate unchanged at 6.50% while maintaining a hawkish tilt to its communication amid an uncertain geopolitical environment.
- Policymakers indicated that there are upside risks to inflation and downside risks to growth, evident in its latest economic projections, which warrants the Bank’s ongoing cautious approach to 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 May. Inflation is still expected to remain “above” the upper bound of the central bank’s tolerance band in the coming months, while the central bank acknowledged the downward effect of profit caps on consumer price growth.
The most notable part of the meeting came with the Bank’s presentation of its key economic projections – which will be released in full on June 26 as part of the latest Inflation Report. Average annual inflation is seen at 4.7% for 2025 and 3.7% for 2026, which compares to a range of 4.5 - 5.1% and 2.9 - 3.9%, respectively, foreseen as part of the March Inflation report. Meanwhile, economic growth projections were cut sharply to 0.8% for this year (from a range of 1.9 - 2.9% seen in March) and is expected to accelerate to 2.8% in 2026 (down considerably from prior estimates of 3.7 - 4.7%).
