The Monetary Council left the base rate unchanged at 5.5%, in line with expectations.

The central bank also kept its interest rate corridor unchanged and announced that it would reduce the number of annual rate-setting meetings from 12 to eight starting in 2027, aligning its schedule with European Central Bank practice.

The MNB said favorable domestic inflation developments and Hungary’s convergence toward eurozone economic and price levels supported the decision to lower the inflation target.

Over the past decade, Hungary’s economic development and overall price level have moved closer to the eurozone average. Further price convergence is expected to occur primarily in services.

Keeping the new target half a percentage point above the ECB’s 2% target would allow some of that adjustment to continue through slightly higher inflation, limiting the short-term burden on the real economy, the central bank said.

The MNB also pointed to substantially lower inflation expectations, a reduced domestic risk premium and the importance of maintaining foreign-exchange market stability. The lead time before the new target takes effect is intended to allow households and businesses to adjust.

The headline forecasts from the September Inflation Report showed an unchanged projection of 1.8% average inflation for 2026. However, the central bank raised its 2027 forecast to 3.1% from 2.3% and lowered its 2028 projection to 2.5% from 3%, matching the new target.

The Monetary Council assessed risks to the baseline inflation and growth forecasts as balanced. Alternative scenarios included persistently higher energy and food prices linked to geopolitical tensions and climate change, sustained strong wage growth and services inflation, a lower domestic risk premium and a slower-than-expected improvement in the international economy.

At the accompanying press conference, MNB Gov. Mihály Varga said both households’ perceived inflation and their inflation expectations had declined.

The council reiterated its commitment to sustainably achieving the inflation target. It said positive real interest rates and financial market stability, particularly in the foreign-exchange market, would help anchor inflation expectations.

Its statement also renewed the emphasis on a cautious, data-driven approach to rate decisions, based on continuous assessment of inflation prospects, global developments and domestic risk premiums.

In an analysis, Equilor said the lower inflation target and cautious communication supported the forint. The brokerage attributed the MNB’s more guarded stance to a deterioration in the external environment and said the revised target implied a slightly higher near-term interest rate path.

In its technical analysis, Equilor identified the HUF 360-361 range against the euro as an important support zone. A decisive break below that range could pave the way for further forint appreciation, with the next support levels at HUF 358.50 and HUF 355 per euro.