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 decision is part of a series of rate cuts, marking the third 25-basis-point reduction this year. The move also adjusts the interest rate corridor, with the overnight deposit rate now at 4.50% and the overnight lending rate set at 6.50%.
The central bank’s actions come as inflationary pressures have subsided, with the inflation rate decreasing to 1.2% in July and core inflation dropping to 1.9%. This environment of easing inflation supports the central bank’s decision to lower rates, aiming to stimulate economic growth further. With the key interest rate now at its lowest point since April 2022, the bank anticipates that inflation will remain below its 3% target throughout the year and into 2027, with expectations of a sustainable return to the target in the early months of 2028.
Hungary’s economic performance has shown resilience, with the country’s economy experiencing a growth of 1.7% year-on-year in the second quarter. This growth is attributed to robust services and improved industrial production. However, the agricultural sector faced challenges due to adverse drought conditions, which have impacted overall agricultural output.
Looking forward, the central bank indicated that its future monetary decisions will be influenced by several factors, including the trajectory of inflation, the stability of the exchange rate, and broader global economic risks. Key concerns include geopolitical tensions and persistently high energy prices, which could impact economic stability and growth.