The Monetary Council of the Hungarian National Bank (MNB) unanimously decided to keep the base interest rate unchanged, Governor Mihály Varga said at a press conference following Tuesday’s meeting in Budapest. The meeting also included discussions on the potential introduction of the euro.
According to the central bank governor, ongoing global uncertainties continue to justify a cautious, patient, and prudent monetary policy. Geopolitical tensions and fiscal uncertainties both require a stability-oriented approach, he added.
Global growth and inflation outlooks are deteriorating, and the resolution of the Iranian conflict remains uncertain, along with its potential impacts.
Energy prices are volatile, markets are unpredictable, and high oil and gas prices are increasing inflation risks—especially in countries heavily reliant on imports. Raw material prices are also rising, and higher fertilizer costs could drive food inflation. While global investor sentiment has improved slightly, financial markets remain highly sensitive to developments, he explained.
He noted that domestically, risk premiums have declined following the parliamentary elections, but their sustainability and inflationary effects must be carefully assessed. The strengthening of the forint is helping to curb price increases, and maintaining foreign exchange market stability is crucial.
He noted that there may be risks in the state budget, but a more accurate assessment of the outlook will only be possible once the new government’s measures are known. Achieving a sustainable inflation target will be supported by disciplined fiscal policy, while easing household and corporate expectations may help ensure price stability. The central bank contributes by maintaining positive real interest rates, and the council will continue to make data-driven decisions.
Responding to questions, Mihály Varga said he has not yet held talks with the incoming prime minister but has already clarified key issues with the nominee for finance minister, and they aim to establish a strong and continuous working relationship.
Mihály Varga. Photo: MTI/Szigetváry Zsolt
On the question of adopting the euro, he stressed that the decision does not lie with the MNB, which can only support the process through monetary policy. He said public expectations regarding euro adoption are excessive, noting that
recent experience shows there is no guarantee of success without thorough preparation. Roughly half of past eurozone accessions can be considered successful,
he added.
The governor also said that Tuesday’s meeting included a briefing on joining the ERM II exchange rate mechanism—the “waiting room” for euro adoption. The central bank is preparing for this work, but the decision will ultimately be made by the government, he stressed.
On Tuesday, the Monetary Council left the base rate unchanged at 6.25%. The interest rate corridor also remained unchanged: the overnight deposit rate stands at 5.25%, while the upper bound—the overnight lending rate—remains at 7.25%. The decision was in line with analysts’ expectations. The next rate-setting meeting will be held on May 26.
Via MTI, Featured image: MTI/Szigetváry Zsolt
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