FX.co ★ Hungary Central Bank Holds Key Rate As Expected

Hungary's central bank has halted its cycle of monetary easing, citing concerns over the potential weakness of the national currency.

The Monetary Council at the Magyar Nemzeti Bank, under the guidance of Governor Gyorgy Matolcsy, opted to maintain the base interest rate at 6.50%. Additionally, the overnight central bank deposit rate was held steady at 5.50%, while the overnight collateralized loan rate remained unchanged at 7.50%.

According to economist Nicholas Farr from Capital Economics, robust wage growth coupled with lenient fiscal policies are likely to hinder the central bank's ability to consistently achieve its inflation targets over the upcoming year. Farr anticipates that interest rates will see a smaller reduction than many analysts predict, with an estimated decrease to 5.00% by the end of 2025.

In September, consumer price inflation dropped to the central bank's target of 3.0%, down from 3.4% in August. This marked the lowest inflation rate recorded since January 2021.