MNI NBH WATCH: Base Rate Held At 6.5%, Stance Confirmed

The National Bank of Hungary left key interest rates unchanged as expected on Tuesday, saying that restrictive monetary policy contributes to financial market stability and citing buoyant consumption, volatile commodity prices and strong wage dynamics, but it reduced banks’ required reserve ratio in what it called a “neutral” move for monetary transmission.

Inflation is expected to stay above the tolerance band for the rest of the year, though it may decline persistently in early 2026 and reach the 3% target in early 2027, the NBH said in its statement.

But household price expectations remain at a high level, after inflation rose to 4.6% in June. While mandatory and voluntary price restriction measures had a significant restraining effect, strong corporate repricings can still be observed outside their scope, the NBH said.

Trade and geopolitical tensions persist, while spending programmes in the European Union and the U.S. could stimulate growth from the next year onwards, it said.

ECONOMY

Hungary’s economy stagnated In 2025 Q1, with high-frequency data for the second quarter continuing to indicate a subdued performance, but unemployment remains low, and from next year onwards, both internal and external factors will support the acceleration of growth, the statement said. (See MNI INTERVIEW: Hungary Outlook Stagflationary - Ex-NBH's Reiff)

The Monetary Council left the base rate unchanged at 6.50%, with the O/N deposit rate and the O/N lending rate also unchanged, at 5.50% and 7.50% respectively.

Policymakers also decided to reduce banks’ required reserve ratio from 10% to 8% as of Aug 1, 2025, pointing to “the gradual decline in the excess liquidity of the banking system during the first half of this year.” The non-interest bearing part of required reserves remains at 2.5% of the reserve base.

“With this technical adjustment, liquidity developments are neutral in terms of their overall impact on monetary transmission and do not imply any change in the continued tight stance of monetary policy,” the NBH said.