Here's why Hungary's central bank left rates unchanged

The MNB's base rate has remained unchanged for fourteen months, and there are signs that this will continue for some time. According to today's announcement, the Monetary Council of the central bank is maintaining its cautious and patient approach. Therefore, it appears that

we have not moved any closer to an interest rate cut over the past month.

The primary objective of the Magyar Nemzeti Bank (MNB) is to achieve and maintain price stability. Without prejudice to its primary objective, the Magyar Nemzeti Bank preserves financial stability and supports the Government’s economic policy, as well as its policy on environmental sustainability.

Although the global growth outlook has improved slightly, ongoing trade and geopolitical tensions continue to create an uncertain global economic environment. The growth outlook for European economies remains subdued. Based on the assessment of the world’s leading central banks, the increasing fragmentation of international supply chains due to tariffs, as well as the continued high price dynamics of market services pose upside risks with regards to the external inflation environment.

International investor sentiment was primarily shaped by the trade negotiations between the United States and China, as well as the interest rate decisions of the world’s leading central banks. Although the Federal Reserve reduced the target range for the federal funds rate by 25 basis points in October, market pricings suggest that further reductions may happen at a slower pace than previously anticipated. The European Central Bank left its policy rates unchanged in October. Market participants do not expect the central bank to further reduce interest rates at its next rate-setting meetings. In the CEE region, the Polish central bank reduced its policy rate by 25 basis points, while the Czech and the Romanian central banks left interest rates unchanged.

Hungary’s GDP rose by 0.6% year-on-year in 2025 Q3. Compared to the previous quarter, it stagnated.

Incoming data was slightly below the September Inflation Report’s short-term forecast. Regarding the structure of growth, the duality of previous quarters remained.

From next year onwards, both internal and external factors will contribute to the pick-up in growth. Strong consumption dynamics will persist over the entire forecast horizon. With the improving performance of the European economy and the rising output of the capacity-increasing investment projects of recent years, a faster expansion of exports is expected.

In October, inflation was 4.3%, similar to the previous three months, while core inflation rose to 4.2%.

Mandatory and voluntary price restriction measures have a significant inflation-reducing effect. However, high annual price indices were still observed in the case of tradables and services that are outside the scope of price restriction measures.

The forint has been strengthening since the beginning of the year, and its favourable effects are increasingly seen in purchase prices. Short-term corporate price expectations showed subdued dynamics in October as well. Household inflation expectations decreased slightly, but remain at a high level.

With price margin restrictions extended and their scope widened, the rate of price increases will decline into the tolerance band by the end of 2025 and temporarily decrease further at the beginning of 2026.

"The 3% inflation target can be achieved in a sustainable manner by ensuring tight monetary conditions. In the current economic situation, maintaining the stability of the foreign exchange market is of key importance in reducing inflation expectations."

The increase to the government's budget deficit targets, the MNB did not offer a detailed opinion. It only noted that

On the forecast horizon, higher budgetary expenditures have a stimulating effect on domestic demand and make reducing the public debt-to-GDP ratio harder.

"In the current macroeconomic environment, the Bank can make the most effective contribution to the easing of economic agents’ increased precaution and to sustainable economic growth by achieving price stability and maintaining financial market stability," the MPC said, reiterating its October message.

"Restrictive monetary policy contributes to the maintenance of financial market stability, the anchoring of inflation expectations consistently with the central bank target and, as a result, to the achievement of the inflation target in a sustainable manner by ensuring positive real interest rates."

The last paragraph of the statement is also the same as in October: "The Monetary Council is committed to the achievement of the inflation target in a sustainable manner.

A careful and patient approach to monetary policy remains necessary

due to risks to the inflation environment as well as trade policy and geopolitical tensions. In the Council’s assessment,

maintaining tight monetary conditions is warranted.

The abridged minutes of today’s Council meeting will be published at 2 p.m. on 3 December 2025.

Cover photo: Portfolio