MNI NBH Review - September 2026: Inflation Target Adjusted

Hidden PDF

Executive summary:

• The National Bank of Hungary kept the base rate unchanged at 5.50%, with the more significant development being the formal adoption of a lower inflation target.
• Policymakers retained a cautious, data-dependent stance, reiterating their commitment to “ensuring positive real interest rates” and “maintaining the stability of financial markets”.
• The upward revision to the 2027 CPI forecast provided the main hawkish element of this month’s meeting.

Ahead of the meeting, a combination of source reports and indications from central bank officials that the inflation target would be lowered had cemented expectations of a hold. Following three consecutive cuts over the summer, keeping rates unchanged also avoids sending a mixed signal by simultaneously lowering the inflation target and easing policy. The Bank announced that its inflation target would be reduced from 3% to 2.5%, bringing it closer to the ECB’s 2% objective. With headline inflation at just 1.3% Y/Y in August, the NBH was able to take advantage of a favourable window to lower the target without immediately needing to reverse course and tighten policy. Alongside the target review, the Council announced that it will reduce the frequency of rate-setting meetings from 12 to 8 per year starting in 2027, bringing it in line with the ECB.

The updated inflation projections were broadly in line with expectations, although the new 2027 forecast arguably sits towards the higher end of the anticipated range. Higher energy prices since June pushed the NBH’s assumptions higher, but this was expected to be largely offset by the significant undershoot in actual inflation relative to the Bank’s previous forecasts. The lower starting point has nonetheless likely absorbed much of the impact of a less favourable external backdrop, resulting in a comparatively modest adjustment to the overall inflation path.