The decision was in line with market consensus. The MNB also lowered both ends of its interest-rate corridor by 25 basis points, setting the overnight deposit rate at 4.5% and the O/N lending rate at 6.5%.
At a press conference following the decision, MNB governor Mihály Varga said inflation developments had again proved more favorable than projected in the central bank’s latest Inflation Report, while Hungary’s overall risk perception had remained stable.
Looking ahead, however, he said monetary policy would be influenced by expectations surrounding the country’s fiscal path, possible euro adoption, and changes in the external financial environment.
The MNB is also reviewing its inflation target, a process that began in the spring. More details are expected in the fall, with one key question being whether Hungary will move from its current 3% inflation target to the European Central Bank’s 2% target in one or two stages.
The forint strengthened following the announcement, partly reflecting expectations that a closer alignment with eurozone monetary standards could support Hungary’s financial stability.
The latest interest-rate cut was underpinned primarily by exceptionally favorable inflation data. Hungary’s annual inflation rate slowed to just 1.2% in July, well below both market expectations and the central bank’s forecasts. The figure marked one of the lowest annual inflation readings in roughly a decade. Consumer prices also fell by 0.1% on a monthly basis. Analysts had expected annual inflation of around 1.5%, making the actual figure a significant positive surprise.
According to Dávid Németh, chief analyst at K&H Bank, food prices and both durable and non-durable consumer goods contributed substantially to the decline in inflation. Lower fuel and other energy prices also helped suppress the headline figure.
However, underlying inflation trends were somewhat less encouraging. Core inflation, which excludes some of the most volatile components of the consumer basket, rose by 0.3% month-on-month and declined only marginally in annual terms. Services remained a particular area of concern. Temporary effects linked to the expiration of previous agreements with banking and telecommunications companies contributed to stronger price pressures in that sector.
Even so, analysts generally expect inflation to remain relatively subdued for the rest of 2026. Price growth could accelerate gradually in the coming months, but forecasts suggest that inflation may remain below the MNB’s target until the end of the year. For 2026 as a whole, inflation expectations remain close to 2%.
The MNB’s forward guidance changed little following the latest meeting. The Monetary Council said it remained committed to achieving the inflation target sustainably and would continue to assess inflation prospects, global developments and changes in Hungary’s risk premium.
The central bank also stressed the importance of maintaining positive real interest rates and financial-market stability, particularly in the foreign-exchange market. The next major policy signal is expected to come with the MNB’s September Inflation Report.
“The National Bank of Hungary will decide on the timing of another possible interest-rate cut based on its new inflation and economic forecasts,” Németh said.
Erste Bank macroeconomic analyst János Nagy said the latest decision and the central bank’s communication had caused no major surprise. Erste continues to expect the base rate to fall to 5% by the end of the year. In Nagy’s view, another reduction could come as early as September, followed by a possible additional move during the final quarter.
Molnár Dániel, chief analyst at the economic think-tank GFÜ Gazdaságelemző Központ, also sees a strong possibility that the easing cycle will continue at the September meeting. While the MNB’s statement did not directly signal another imminent rate cut, its inflation projections suggest that the central bank may have room to continue easing monetary policy.
Molnár expects the pace of rate cuts to slow later in the cycle. Under favorable external conditions, however, the base rate could reach 5% by the end of the year while still preserving a meaningful positive real interest rate.
The forint has provided important support for Hungary’s monetary policy. The currency has recently traded within a relatively narrow range of around 360 to 365 against the euro, helping to reduce imported inflationary pressures. Earlier strengthening of the forint has also gradually fed through into domestic consumer prices.
At the same time, analysts caution that Hungary remains vulnerable to changes in international investor sentiment. The international environment has become increasingly uncertain as geopolitical tensions have pushed energy prices higher. The escalation of the conflict with Iran has added to market uncertainty and raised concerns about future energy costs.
Gas prices have risen above EUR 60 in recent weeks, already a relatively elevated level. Some forecasts suggest that significantly higher prices cannot be ruled out if geopolitical tensions intensify. A renewed surge in energy costs could quickly alter Hungary’s inflation outlook and reduce the MNB’s room for further monetary easing.
The policies of the world’s major central banks will also be closely watched. The MNB will continue to monitor developments at both the U.S. Federal Reserve and the European Central Bank, particularly because changes in international interest-rate differentials can influence capital flows and the attractiveness of Hungarian financial assets.
Market expectations regarding the Fed and ECB have shifted in recent months. Although softer U.S. inflation data has improved sentiment, uncertainty remains over the direction of global monetary policy. Any narrowing of Hungary’s interest-rate advantage could place pressure on the forint and weaken demand for Hungarian assets.
For now, however, analysts believe improving perceptions of Hungary’s economic risk profile have helped offset some of these external pressures.
Economists broadly agree that further easing remains possible, although forecasts differ regarding how far the MNB will go this year. Erste analyst Nagy expects the base rate to reach 5% by the end of 2026, assuming inflation remains under control and the external environment does not deteriorate significantly. GFÜ’s Molnár agrees.
K&H is more cautious. Its current forecast is that the base rate could remain at 5.5% at year-end, although Németh believes rates could fall further in 2027. Under favorable inflation conditions and assuming Hungary’s risk premium continues to improve, the benchmark rate could potentially decline towards 4.5% next year.
This article was first published in the Budapest Business Journal print issue of September 4, 2026.
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