The central bank of Hungary has continued its path of monetary easing, announcing a 25-basis-point reduction in its key interest rate, bringing it down to 5.50% as of Tuesday. This adjustment also extends to the interest rate corridor, with both the overnight deposit rate and the overnight lending rate seeing a similar 25-basis-point cut to 4.50% and 6.50%, respectively.
This latest decision marks the third consecutive reduction of 25 basis points this year, taking the key interest rate to its lowest point since April 2022. The central bank’s actions are largely influenced by the easing of inflation, which decreased to 1.2% in July, while core inflation dropped to 1.9%. According to the central bank, inflation is expected to remain below the 3% target throughout the rest of the year and into 2027, with a sustainable return to the target anticipated in the first half of 2028.
In terms of economic performance, Hungary’s economy experienced a year-on-year growth of 1.7% during the second quarter. This growth was primarily driven by services and an increase in industrial output, although agricultural output was negatively impacted by ongoing drought conditions.
The central bank emphasized that future rate decisions will be heavily dependent on several factors, including the trajectory of inflation, the stability of the exchange rate, and global economic risks. Among these are geopolitical tensions and the persistently high energy prices that continue to pose challenges on the global stage.