MNI NBH WATCH: Rate Hold Seen As Inflation Stays Above Target

The National Bank of Hungary is widely expected to leave its base rate on hold at 6.5% on Tuesday, with inflation risks persisting despite June’s core moderation, slowing wage gains, exchange rate stability and sluggish GDP growth.

Headline inflation ticked up from 4.4% in May to 4.6%, in line with the NBH’s projected average of 4.7% for the year, though it said at its last meeting that the pace of price increases “may decline persistently to the tolerance band in early 2026 and reach the 3% inflation target in early 2027.” (See MNI INTERVIEW: Hungary Outlook Stagflationary - Ex-NBH's Reiff)

Food prices rose 6.2% and services by 5.4% in June even as government price and profit margin shields remained in place, yet with the forint hovering comfortably above 400 to the euro, there is scant reason to tighten. (See MNI INTERVIEW: Gov Schemes Put NBH Focus on FX - Ex-DG Kiraly)

Governor Gyorgy Varga is likely to repeat that a restrictive monetary policy setting and a “careful and patient approach” to future easing remain necessary, with trade policy and geopolitical tensions still to the fore.