The Hungarian central bank cut its base rate by 25 basis points to 6.0 percent on Tuesday, following a sharper-than-expected decline in inflation. The May consumer price index rose just 1.8 percent year-on-year, well below the bank’s target range.
The Magyar Nemzeti Bank’s decision, the second reduction this year, was widely anticipated by analysts after the publication of final inflation data. – The decision was made in view of the observed gradual easing of inflationary pressure and favorable external conditions supporting the normalization of monetary policy – the central bank said in a statement.
Financial market analysts noted the gradual and controlled approach to rate adjustments, which was reinforced by a rating assessment from S&P Global Ratings. At the end of May, the agency affirmed Hungary’s long- and short-term credit ratings in foreign and local currency at 'BBB-/A-3′, though it maintained a negative outlook.
Fiscal and structural headwinds persist
Despite the encouraging inflation picture, Hungary’s economy continues to face significant challenges. A high budget deficit, substantial foreign currency debt and rising debt servicing costs remain key concerns. Consumer spending has weakened, and GDP growth is estimated at between 1.7 and 1.8 percent this year, suggesting limited momentum.
The combination of fiscal imbalances and subdued domestic demand is likely to keep the central bank cautious in its further policy easing. The negative outlook from S&P reflects these risks, particularly the elevated public debt ratio and external vulnerability.
Previous move and outlook
Tuesday’s cut follows a similar 25-basis-point reduction in February this year, which brought the base rate to 6.25 percent at that time. The bank has now lowered rates by a total of 50 basis points in 2026, signaling a gradual normalization cycle.
Markets expect further modest cuts if inflation remains subdued and the forint stays stable. However, the pace will depend on external factors, including global monetary policy trends and Hungary’s ability to address fiscal imbalances.
Źródło: WNP.PL, Fot. TTstudio / Shutterstock
