MNI NBH WATCH: Rates Held, Projections Broadly Unchanged

The National Bank of Hungary left interest rates unchanged as expected on Tuesday, but said that despite new macroeconomic projections improving slightly, risks to the inflation outlook were mostly to the upside, with downside risks to growth. (See MNI NBH WATCH: Another Rate Hold Seen, New Projections)

“The scenarios highlighted by the Council assume stronger consumption growth, escalating geopolitical tensions, and prolonged weak growth in Europe,” the NBH said in a statement.

“A careful and patient approach to monetary policy remains necessary due to risks to the inflation environment as well as trade policy and geopolitical tensions. In the Council’s assessment, maintaining tight monetary conditions is warranted.”

Headline inflation held steady at 4.3% in August, while core inflation fell from 4.0% to 3.9%, thanks in part to the “significant” diminishing effect on price growth of mandatory and voluntary measures, the NBH said, though strong corporate repricings continue elsewhere. 

At 4.6%, CPI inflation is seen 0.1% lower by the end of this year than in the June projections, but 0.1% higher in 2027 at 3.8%. Average inflation projections are unchanged for 2027 at 3.0%, as the NBH emphasised that its target rate can be achieved under the baseline scenario of maintaining tight monetary conditions. 

Recent forint strengthening has been positive for manufacturing producer prices and export prices, the Bank said. But household inflation expectations remain high despite a slight fall, while Hungary’s “subdued” economy is expected to recover only slowly over the remainder of this year

“The baseline scenario in the September projection is surrounded by mostly upside risks to inflation and downside risks to growth,” it said.

Domestic GDP is seen expanding by 0.6% in 2025, compared with the 0.8% seen in June. The projection for overall GDP was unchanged at +2.8% in 2026 and +3.2% in 2027.

Loans to households are seen rising by 17-20% in 2025 and by 18-22% in 2026 on the back of government loan programmes and subsidies, while outstanding corporate loans are expected to increase by 2% this year and next.