Hungary’s central bank held its base interest rate at 5.50% on Oct. 20 as it forecast inflation above its current target in 2027, complicating the case for further cuts.
The Magyar Nemzeti Bank (MNB) also kept its overnight deposit rate at 4.50% and its overnight collateralised lending rate at 6.50%. The decision takes effect Oct. 21. The bank said holding rates at current levels would help bring inflation back to its target over time.
The MNB expects average inflation of 1.8% in 2026 and 3.1% in 2027. Its current target is 3% and is scheduled to fall to 2.5% on Jan. 1, 2028. The bank expects higher fuel prices and changes to tobacco excise duties to add to price pressures through the rest of this year and in 2027.
Inflation has been lower in recent readings. Consumer prices rose 1.6% from a year earlier in September and 0.2% from August, the Hungarian Central Statistical Office reported. Core inflation, measured without seasonal adjustment, was 1.9% from a year earlier.
International Monetary Fund (IMF) staff estimated Hungary’s 2026 budget deficit at 7% to 7.5% of gross domestic product. Citing elevated services inflation and wages rising faster than productivity, the staff advised waiting for more lasting evidence that inflation is easing before cutting rates further.
Economic activity presented a mixed picture in August. Industrial output rose 8.7% from a year earlier. Retail sales increased 2.4% year over year but fell 0.7% from July on a seasonally and calendar-adjusted basis, according to the statistical office.
In analysis carried by FXStreet before the decision, Commerzbank analyst Tatha Ghose argued that his preferred inflation measures and signs of economic recovery weighed against another rate cut. His assessment of seasonally adjusted inflation is his own measure, rather than an official inflation reading.
The MNB is scheduled to release minutes from the Oct. 20 meeting on Nov. 4. October inflation data are due Nov. 10, ahead of the bank’s next policy decision on Nov. 17.
