Hungary cenbank keeps rates on hold, Governor holds press conference
Hungary monetary easing hinges on inflation data for the coming months
"The Council is constantly assessing incoming macroeconomic data and factors influencing the inflation outlook, in particular repricings at the start of the year and the stability of financial markets, based on which it will take decisions on the level of the base rate in a cautious and data-driven manner from meeting to meeting," the Hungarian central bank (MNB) said in the rationale of its on-hold rate decision on Tuesday. Regarding its forward guidance, the MNB repeated the messages from December, meaning that monetary easing could be introduced within the next month or so if the inflation data is favourable.
Uncertainty over how long the trend seen in December will last
We make decisions on a meeting-by-meeting basis, analysing the processes that could affect them. In December, inflation was 3.3%, which is higher than the central bank's forecasts. This is mainly due to price increases for processed foods, industrial goods and services.
At present, we cannot determine how long this trend will last, so we are making the necessary decisions based on factual data,
Varga stressed.
Increasing gold reserves may be considered
We make decisions based on the perspective of the central bank, and the Monetary Council acts to maintain price stability, said Varga. In response to a question, he added that they currently have 110 tonnes of gold reserves and that,
while there are currently no plans to increase this, they are considering it.
"Personally, I would not consider it unthinkable that we might increase these gold reserves," he added.
No change in guidance
The Council has not changed its forward guidance. We will continue to make cautious, data-driven decisions on interest rates from meeting to meeting, emphasised Mihály Varga.
Caution required
Inflation expectations among the general public have not changed significantly and remain above the level required for price stability.
Overall, caution is still needed as households' expectations are decisive for the medium-term inflation outlook,
said Mihály Varga.
Stability in the foreign exchange market is crucial for moderating inflation and expectations, and the strengthening of the forint is increasingly being reflected in purchase prices. The MNB is confident that this will soon be reflected in consumer prices as well.
Good news on the inflation front
Inflation fell to 3.3% in December, while the average annual price increase in 2025 was 4.4%. The good news is that core inflation fell to 3.8%, which
the Monetary Council also viewed positively, as inflation remained within the tolerance band for the second consecutive month. This suggests that there is a good chance the rate of price increases will fall below the 3% target at the start of the year.
Varga added that the first information on price adjustments at the beginning of the year will be available in February from the January data.
The Governor pointed out that the continued high inflation in market services in December was mainly caused by telecommunications services and tourism.
Duality in the economy remains
According to Varga, the duality in the structure of domestic economic growth persisted, with retail sales continuing to expand while industrial performance remained subdued and construction output declined.
Repricings in early 2026 will be are key
'The Council is paying close attention to corporate price adjustments at the beginning of the year, which will be decisive in terms of inflation prospects,' said the Governor. He added that, in their view, a stable and patient approach is still required.
Since the beginning of the year, international developments have once again taken centre stage and the central bank is closely monitoring these processes, he added.
Unanimous decision
The Monetary Council concluded that a stability-oriented monetary policy approach remains necessary and therefore decided to keep interest rates unchanged.
The decision was unanimous, with no other proposals put forward,
said MNB Governor Mihály Varga.
Base rate on hold
The Monetary Council left the base rate on hold at 6.5%, as expected.
However, analysts believe that the first interest rate cut may be approaching. The central bank could take action as early as February, so today's meeting is likely to attract more attention than usual.
