Hungary's central bank cuts interest rate to 8.25% amid inflation focus

The Monetary Council of the National Bank of Hungary (MNB) reduced the base interest rate by 0.75 percentage points to 8.25 percent on Tuesday, as announced by the central bank following the meeting. This decision met the expectations of most analysts.

The Hungarian central bank lowered the interest rates to 8.25 percent. This marks the sixth consecutive rate cut, although the reduction last month was more significant, with a decrease of 1 percentage point. Following that adjustment, the forint weakened against the euro and the dollar. In March, it neared the level of 400 forints per euro, signaling a potential concern.

The MNB has highlighted that its primary focus remains on the inflation target rather than the immediate currency reactions. However, the recent cut of 0.75 percentage points suggests that the central bank is adopting a more cautious approach once again, moving away from the more aggressive cut of 1 percentage point seen in the previous round.

The current interest rates are significantly lower than their peak at 13 percent. Both the government and the Chamber of Commerce, particularly Economy Minister Márton Nagy and Chamber President László Parragh, have indicated through Hungarian media that they find the pace of reduction too slow.

In Hungary, inflation dropped to 3.7 percent. The inflation target set by the central bank is 3 percent. For nearly two years, Hungary was the leading country in terms of price increases within the European Union. The highest inflation rate was observed in January 2023, when it reached 25.7 percent year-over-year.