MNI NBH WATCH: Sticky Price Growth Reinforces Policy Hold

The National Bank of Hungary is widely expected to leave its base rate at 6.5% next week, with policymakers reiterating the need to maintain a tight monetary policy stance and their commitment to a careful, patient, stability-oriented approach, helped in part by further mild forint appreciation. (See MNI NBH WATCH: Rates Held, Projections Broadly Unchanged)

Headline inflation was 4.3% in October, as it has been since August, while core inflation rose 0.3 percentage points from the previous month to 4.2%, according to the latest flash analysis. 

That means there is little reason for the outcome of Tuesday’s meeting of the Monetary Council to differ from October's, with the emphasis on subdued economic growth - albeit with improvements, largely consumer-driven - seen from next year, and declining, but still high, household inflation expectations.

As stated by the NBH, inflation is expected to remain above the central bank tolerance band of 3% ± 1% for the remainder of 2025, though the assertion that a persistent decline to levels within the tolerance band in early 2026 is likely to be repeated. (See MNI EM INTERVIEW: NBH Rates On Hold Until At Least April - Ex-Gov)
 

Maintaining the stability of the foreign exchange market continues to be of key importance - another important factor in the continued hawkishness in both the NBH’s decision statements and subsequent presentations. (See MNI EM INTERVIEW: US-Hungary Swap Deal Sign Limits Will Be Tested)

The NBH is likely to revise its language around Hungary’s fiscal deficit, following the announcement this week that this will hit 5% this year and in 2026, having previously pointed towards a possible decline.

It will be interesting to see, too, the extent of any changes in the central bank’s view on the debt-to-GDP ratio, which it had suggested could moderate further over the forecast horizon.