In a continued effort to ease monetary policy, Hungary’s central bank has reduced its key interest rate by 25 basis points, bringing it down to 5.50% as of Tuesday. This latest adjustment is part of a series of cuts implemented throughout the year, marking the third consecutive reduction of the same magnitude. The central bank also adjusted the interest rate corridor, lowering both the overnight deposit rate to 4.50% and the overnight lending rate to 6.50%.
This strategic move by the Monetary Council comes as inflation in Hungary shows signs of easing, with the rate dropping to 1.2% in July and core inflation settling at 1.9%. These figures are key considerations for the central bank, which anticipates that inflation will remain below its 3% target for the remainder of the year and continue below target through 2027, before aligning sustainably with the target in the first half of 2028.
Economically, Hungary witnessed a 1.7% growth in its GDP year-on-year during the second quarter. This growth was largely driven by the service sector and a boost in industrial output. However, the country’s agricultural sector faced challenges, as drought conditions adversely affected its performance during this period.
Looking ahead, the central bank emphasized that its future rate decisions will be influenced by several factors, including the trajectory of inflation, the stability of the exchange rate, and broader global economic risks. Among these global concerns are geopolitical tensions and the persistently high energy prices, which could impact Hungary’s economic stability.