The Magyar Nemzeti Bank (MNB) lowered its benchmark interest rate by 25 basis points on Tuesday, the third cut this year. The base rate now stands at 5.25 percent, the lowest level since May 2022. Analysts expect another reduction in September, though rising fuel prices could slow the disinflation trend.
The decision, announced on 21 July 2026, brings the cumulative easing in 2026 to 135 basis points. The MNB cited the steady decline in consumer prices as the main justification. Annual inflation fell to 2.1 percent in April, 1.8 percent in May and 1.7 percent in June – well within the central bank’s target range of 3 percent plus/minus 1 percentage point.
Earlier this year, market participants – including economists from PKO Bank Polski – had projected another rate cut as early as September. However, a recent spike in global oil prices has pushed up fuel costs at Hungarian pumps, threatening to reverse some of the disinflation gains. The MNB is likely to monitor the situation closely before deciding on further moves.
Rate cut cycle continues
The MNB has been gradually loosening monetary policy since the start of 2026, after keeping rates elevated for most of 2025 to combat double-digit inflation. The current cycle reflects growing confidence that price pressures have been tamed. – The decision was driven by the declining inflation rate – stated the MNB in a press release. The central bank expects inflation to remain around the target in the coming months, barring external shocks.
Hungary’s economic growth remains modest, with GDP expanding by around 1.5 percent year-on-year in the first quarter. Lower borrowing costs are intended to support consumption and investment, which have been sluggish due to high interest rates. The MNB is walking a tightrope between stimulating growth and preventing a resurgence of inflation, especially as energy and fuel prices remain volatile.
Market reaction and outlook
The forint barely moved after the announcement. The euro traded at 360.70 HUF, the US dollar at 315.95 HUF, and the Polish zloty at 83.75 HUF. The stability suggests that the cut was largely priced in by traders. Meanwhile, the yield on 10-year Hungarian government bonds fell to 5.49 percent, reflecting improved investor sentiment.
Looking ahead, the central bank’s next policy meeting is scheduled for late September. If inflation remains subdued and global oil prices stabilise, another 25-basis-point reduction is likely. However, any significant increase in fuel or food prices could prompt the MNB to pause its easing cycle. The bank’s priority remains anchoring inflation expectations while supporting economic recovery.
Źródło: WNP.PL, Fot. Wikimedia Commons
