MNI NBH WATCH: Flat Inflation Sees Expected 6.5% Rate Hold

The National Bank of Hungary kept rates on hold at 6.5% as expected on Tuesday, saying in a statement that September’s headline inflation of 4.3% and core inflation of 3.9% pointed to inflation staying above the central bank’s tolerance band this year. (See MNI EM NBH WATCH: Rate Hold At 6.5% Seen As Risks Stay To Upside)

Government price controls are still having some effect on inflation, but the MNB repeated that strong corporate repricing are observable elsewhere. However, the effects of recent forint strengthening are showing up increasingly in manufacturing producer and import prices, the statement said, and the rate of price increases may yet converge to within the band in early 2026, reaching 3% in early 2027.

The statement removed September’s reference to the predominance of upside risks to inflation and downside risks to growth, along with expectations of a slow recovery over the remainder of 2025, equating to around +0.6%. Instead, “from the next year onwards, both internal and external factors will contribute to the pick-up in growth," it said.

Also gone was the previous month’s reference to the government’s summer fiscal handouts and their possible deficit-increasing effects from 2026, but it repeated that Hungary’s fiscal deficit “may decrease further” to near-equilibrium levels in 2025 due to a decline in government interest payments.

“In the current macroeconomic environment, the Bank can make the most effective contribution to the easing of economic agents’ increased precaution and to sustainable economic growth by achieving price stability and maintaining financial market stability,” the Bank said.

“In line with the stability-oriented approach, the Monetary Council left the base rate unchanged at 6.5% at today’s meeting. The O/N deposit rate and the O/N lending rate also remained unchanged, at 5.5% and 7.5%, respectively.”