Hungary Cuts Key Interest Rate as Inflation Falls

The National Bank of Hungary cut its benchmark interest rate by 25 basis points to 6.25% at its February 2026 meeting, as markets expected, marking its first rate cut in nearly 18 months. Annual headline inflation fell to 2.1% from 3.3% the prior month, dipping below the central bank’s 3% target for the first time in five years. Services inflation, which Governor Mihaly Varga has called “decisive” for monetary easing, eased to 5%. Investors will now watch for signals on whether this cut signals the start of a broader easing cycle.

The National Bank of Hungary kept its key interest rate at 6.5% in its January 2026 meeting, as expected by markets, to maintain the cutting cycle that ended in September of 2024. The unchanged monetary policy setting was despite its guidance change in the previous meeting, which dropped the rhetoric of ruling out rate cuts to signaling it will make decisions on a meeting-by-meeting basis. The latest data showed that inflation slowed to a 14-month low of 3.3% in December, close to the mid-point of the NBU's target range of 3%. Still, services inflation in the period soared to 6.8%, paring the outlook of imminent cuts for the central bank.

The National Bank of Hungary kept its key interest rate at 6.50%, extending its pause for a 15th straight meeting, in line with market expectations. This tied Romania for the highest level in the EU. Headline inflation fell to a 1-year low of 3.8%, entering the 3% ±1 percentage point target range for the first time in a year, aided by a stronger forint and the decline in global commodity and food prices. The bank trimmed its 2026 inflation forecast to 3.2% from 3.8% and lowered its GDP growth projection for the same year to 2.4% from 2.8%, citing a dual-speed economy, with robust private consumption offsetting weaker investment and net exports. Tightness in the labor market has moderated in recent quarters, though unemployment remains near historical lows. On the global front, economic growth has shown modest improvement, though lingering trade and geopolitical tensions pose risks. The MNB signaled that monetary easing could be considered if inflation and exchange rate dynamics permit.