Financial News: Hungarian Central Bank Leaves Rate Unchanged For Third

Hungarian Central Bank Leaves Rate Unchanged For Third Time

12/17/2024 - 16:02:00 (RTTNews)

(RTTNews) - Hungary's central bank, the Magyar Nemzeti Bank, held the key interest rate steady for a third policy session in a row to ensure financial stability and to help bring inflation to the target sustainably.

The Monetary Council left the base rate unchanged at 6.50 percent on Tuesday, in line with economists' expectations. The previous change in the rate was a 25 basis points reduction in September.

The overnight deposit rate and the overnight collateralized lending rate were also left unchanged, at 5.50 percent and 7.50 percent, respectively.

"Restrictive monetary policy contributes to the maintenance of financial market stability and the achievement of the inflation target in a sustainable manner by ensuring positive real interest rates," the central bank said.

"Looking ahead, a careful and patient approach to monetary policy is warranted," the MNB said.

"In the Council's assessment, geopolitical tensions, volatile financial market developments and the risks to the outlook for inflation warrant further pause in cutting interest rates."

The central bank projected the Hungarian economy to grow by 0.3-0.7 percent this year, by 2.6-3.6 percent next year, by 3.5-4.5 percent in 2026, and by 2.5-3.5 percent in 2027.

Inflation is expected to increase further temporarily until January 2025 and is seen above the central bank tolerance band. Disinflation will restart thereafter, in the first quarter of next year, the bank said.

Hungary's inflation is expected to average between 3.6-3.7 percent this year, between 3.3-4.1 percent in 2025, and between 2.5-3.5 percent in 2026 and 2027.

Research firm Capital Economics thinks that <a href=https://www.rttnews.com/3496283/hungary-inflation-rises-to-3-7-in-november.aspx target=_blank >a rise in inflation</a> in early 2025 will keep rates on hold until at least the new governor, Mihaly Varga, takes charge in March.

"With upside inflation risks from strong wage growth likely to remain high and the possibility of fiscal loosening as elections draw nearer in early 2026, we think that interest rates will be cut by at most 100bp by end-2025," Capital Economics economist Nicholas Farr said.

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