The two ends of the interest rate corridor also remained unchanged at 5.5% and 7.5%, respectively. The decision did not come as a surprise and was in line with the broad consensus among analysts.
In a statement released after the meeting, the MNB indicated that the prolonged geopolitical conflicts and tariff announcements continue to cause an uncertain global economic environment. At the same time, the risk of recession has decreased due to the more favorable-than-expected first tariff agreements from the United States.
In the European Union, meanwhile, the announced spending increase programs may stimulate growth from next year. The most important message of the statement, the forward guidance contained in the last paragraph, remains unchanged from last month.
“The Monetary Council is committed to achieving the [2-4%] inflation target in a sustainable manner. The risks surrounding the inflation environment, as well as trade and geopolitical tensions, continue to require a cautious and patient monetary policy. In the council’s judgment, the maintenance of tight monetary conditions is justified,” it read.
The preliminary figures of the MNB’s latest Inflation Report (due to be published in full on Thursday, June 26, after this issue went to print) show that the central bank has significantly lowered its economic forecast for this year. While the government still expects a 2.5% GDP growth rate for 2025, the MNB now says that expansion will be only 0.8%. Three months earlier, the midpoint of the range forecast for this year (1.9-2.9%) was 2.4%, indicating how significantly the central bank has worsened its forecast downwards.
The new growth forecast is essentially in line with the current expectations of market analysts. The MNB remains confident that both internal and external factors will contribute to an economic recovery from next year. Thus, the Hungarian economy is expected to grow by 2.8% in 2026 and 3.2% in 2027, according to the key figures in the report.
Back in March, however, the MNB expected that the economy could grow between 3.7% and 4.7% in 2026. In other words, the central bank has significantly cut not only this year’s GDP growth expectations but also next year’s.
An annual average inflation of 4.7% is expected this year, while the Consumer Price Index forecast is that it will moderate to 3.7% in 2026 and 3% in 2027. According to the MNB, the inflation rate will vary above the tolerance band. Overall, MNB Governor Mihály Varga sees upward inflation risks and downward growth risks. Hungary’s May 2025 figure of 4.5% up from May 2024 was the third worst in the European Union.
In its analysis, the MNB drew attention to the volatile development of global investor sentiment, the sensitivity of international financial markets and the volatility of energy prices in the wake of the escalation of the conflict in the Middle East, according to Orsolya Nyeste, head analyst at Erste Bank.
In response to a question in the press conference following the rate decision, Varga had said that the central bank’s balance sheet contraction is in line with its strict monetary policy stance. In essence, he suggested that the expiring preferential credit programs are not planned to be offset with similar programs. In any case, the inclusion of foreign currency debt somewhat slows the contraction of the central bank’s balance sheet, according to Nyeste.
“As for the outlook, we believe that further easing inflation expectations, the undiminished risk perception towards Hungarian assets, and the start of Fed (or regional) interest rate cuts could create the conditions for central bank interest rate cuts. However, we will probably have to wait until at least the end of the autumn for this,” she stated.
MBH Bank analysts Márta Balog-Béki and Ákos Sümegi noted the widening discrepancy in the growth expectations between the central bank and the government for this year.
“The central bank has announced lower expectations than the government’s and is also projecting a lower growth trajectory than our forecasts,” they said. “The MNB expects an average inflation of 4.7% this year (0.2 percentage points higher than the government’s expectation), inflation may be 3.7% in 2026, and 3% in 2027. Price-limiting measures have significantly reduced inflation in the short term, but strong price increases are still observed in companies,” they added.
The MBH Bank analysts still believe that the central bank will not be able to cut interest rates before the end of this year. However, they expect noticeable interest rate cuts in 2026, expecting a base rate of 6.25% by the end of 2025 and 5.25% by the end of 2026.
Although fundamental inflationary processes have eased further and the forint has also been relatively stable in the turbulent international financial market environment, the central bank still had no room to cut interest rates, Dániel Molnár of economic think-tank GFÜ argues.
“We expect this to happen at the September meeting at the earliest, but maybe only at the end of the year. The conditions for easing interest rates are that domestic inflationary pressures continue to ease, geopolitical conflicts (Russia-Ukraine, Israel-Iran, and trade tensions) also move towards lasting consolidation, and the Fed begins cutting interest rates, which currently limits the room for maneuver of monetary policy in emerging markets,” he said.
This article was first published in the Budapest Business Journal print issue of June 27, 2025.
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