The National Bank of Hungary (MNB) cut its benchmark interest rate by 25 basis points on Tuesday, marking the third reduction this year. The reference rate now stands at 5.25 percent, the lowest level since May 2022. Analysts expect another cut in September, though rising fuel prices could put upward pressure on inflation.
The central bank lowered the base rate by another 25 basis points, following a similar move in June. Since the beginning of 2026, the total reduction amounts to 135 basis points. The decision was driven by steadily declining inflation, which fell from 2.1 percent in April to 1.8 percent in May and further to 1.7 percent in June. The MNB’s inflation target is 3 percent with a tolerance band of plus or minus 1 percentage point.
The forint remained stable after the announcement. Against major currencies, the exchange rate showed little change: the euro traded at 360.70 HUF, the US dollar at 315.95 HUF, and the Polish zloty at 83.75 HUF. The yield on 10-year government bonds declined to 5.49 percent, reflecting growing investor confidence in the easing cycle.
Inflation outlook and the fuel price risk
While consumer price growth has moderated significantly, the recent surge in global oil prices has already pushed up fuel prices at Hungarian petrol stations. This development could reverse the disinflation trend and potentially delay further monetary easing. Analysts from PKO Bank Polski recently predicted that the next cut would come in September, but they now acknowledge that the fuel price spike may complicate the decision.
The MNB’s policy statement highlighted that the current inflation path remains within the target range, but the central bank will monitor external price pressures closely. The bank has not ruled out further cuts if the inflation outlook continues to improve, but risks remain tilted to the upside.
Market reaction and expectations
Financial markets reacted calmly to the decision. The forint held its ground, and bond yields edged lower, signaling that investors had already priced in the cut. The central bank’s gradual approach appears to be well received by market participants. Some analysts expect the base rate to fall to 5.00 percent by the end of 2026, provided that inflation does not reaccelerate.
Hungary’s economy has been under pressure from high energy costs and weak domestic demand. Lower interest rates should help stimulate borrowing and investment, but the central bank must balance this with the risk of imported inflation from energy commodity prices. The next monetary policy meeting is scheduled for September. The decision will likely depend on data from July and August, including inflation figures and fuel price trends.
Forward guidance unchanged
The MNB maintained its forward guidance, saying that further cautious rate cuts are possible if the inflation outlook remains favorable. However, policymakers emphasized that any external shocks, especially those related to energy prices, could alter the course. The bank will continue to assess data on a month-to-month basis. The next decision is imminent and markets are watching closely.
For now, the Hungarian economy enjoys the lowest borrowing costs in over four years. This supports both consumer spending and corporate investment. But the path ahead depends on how quickly oil prices stabilize and whether the disinflation trend endures.
Źródło: WNP.PL, Fot. Random photos 1989 / Wikimedia Commons / CC 4.0 BY-SA
