The council also maintained the overnight deposit rate at 5.5% and the overnight collateralized loan rate at 7.5%, keeping the central bank’s symmetric interest rate corridor intact.
“Geopolitical tensions, a volatile financial market environment, and risks to the outlook for inflation warrant the maintenance of tight monetary conditions,” the Council said in a statement following the meeting. “Restrictive monetary policy contributes to the maintenance of financial market stability and the achievement of the inflation target in a sustainable manner by ensuring positive real interest rates.”
The rate-setting body highlighted “significant uncertainty” surrounding the interest rate paths of major global economies, citing increased risk aversion toward emerging markets and the ongoing impact of geopolitical tensions as factors driving inflationary pressures.
At a press conference following the meeting, Deputy Governor Barnabás Virág said that global investor sentiment had been characterized by heightened uncertainty and volatility since December’s policy meeting, emphasizing the need for a disciplined and cautious approach to monetary policy.
Virág confirmed that maintaining the base rate at 6.5% was the only option discussed at the meeting, with unanimous support for the decision. He noted that both consumer prices and core inflation had risen faster than expected in December, increasing the risk of a higher inflation trajectory in 2025.
Upside risks to inflation, he explained, have been exacerbated by risk aversion toward emerging markets and ongoing geopolitical conflicts. Virág also pointed to a likely divergence in monetary policy between the U.S. Federal Reserve and the European Central Bank in 2025, which could further amplify risk aversion in emerging markets.
“Maintaining financial market stability is crucial for inflation to return to the central bank target in a sustained manner,” Virág said, adding that strengthening the effectiveness of monetary policy transmission remains a priority.
Despite these challenges, Virág noted a general improvement in Hungary’s economic fundamentals and said that disinflation is expected to resume from February onward. He also fielded questions on the central bank’s policy trajectory, emphasizing that the base rate has remained on hold for four consecutive months and that the option of a rate cut is not currently on the agenda.
“The base rate may remain at the current level for an extended period,” he concluded.
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