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 adjustment marks the third such reduction in succession this year, aligning the key rate to its lowest point since April 2022. The decision to cut rates was primarily influenced by a decrease in inflation rates, which saw a decline to 1.2% in July, while core inflation settled at 1.9%.
Alongside the key interest rate, the Monetary Council also adjusted the parameters of the interest rate corridor, decreasing both ends by 25 basis points. Consequently, the overnight deposit rate now stands at 4.50%, and the overnight lending rate is set at 6.50%. The central bank’s outlook anticipates that inflation will remain below its target of 3% for the remainder of the current year and continue this trend until 2027, with expectations of reaching the target sustainably by the first half of 2028.
Economic performance in Hungary showed growth, with the economy expanding by 1.7% year-on-year during the second quarter. This growth was bolstered by robust service sector activities and increased industrial production. However, the agricultural sector faced challenges due to drought conditions, which put a strain on overall growth.
The central bank has emphasized that future interest rate decisions will heavily rely on various factors, including inflation trends, exchange-rate stability, and broader global economic risks. Among these global concerns are geopolitical tensions and persistently high energy prices, which could impact Hungary’s economic landscape and influence monetary policy directions.
