MNI NBH WATCH: Another Rate Hold Seen, New Projections

The National Bank of Hungary is widely expected to leave its base rate unchanged at 6.5% when it meets on Tuesday, with fresh macroeconomic projections unlikely to prompt a change to promises to maintain tight monetary conditions. (See MNI EM NBH WATCH: Rate Hold, Price Risks Seen Despite Weak Growth)

While recent forint stability has been positive, the Bank expects both headline inflation, unchanged from July at 4.3% in August, and core inflation to stay above the upper limit of the 3% +/- 1pp target for the remainder of the year, even though the core measure has now dipped just below 4%. Last month, the NBH said the rate of price increases “may decline persistently to the tolerance band in early 2026, before reaching target in early 2027.”

Governor Mihaly Varga is likely to repeat support for patient and stability-oriented monetary policy. (See MNI EM INTERVIEW: NBH FinStab Move Signals Clear Concern - Ex-DG)

At its last meeting, the Bank stressed that household inflation expectations remained high, and that a decrease in short-term corporate price expectations had slowed, though government measures to impose mandatory and voluntary price restrictions had some effect. 

“Given buoyant consumption, volatile commodity prices and strong wage dynamics, price stability can be achieved in a sustainable manner by ensuring tight monetary conditions," the Bank said.