The Monetary Council of Hungary's central bank left the base rate on hold at 6.25% and the interest rate corridor was also left unchanged at the monthly meeting on May 26, in line with the consensus, financial website Portfolio.hu writes.

According to the Hungarian National Bank's (MNB's) assessment, global risks remain elevated due to energy and commodity price volatility and disruption in global supply chains. The central bank said it is closely monitoring developments in energy markets, as prolonged geopolitical risks could keep inflation higher for longer, particularly for emerging market countries with high import volumes.

The forint gained 7% against the euro since early March and the stronger exchange rate helps to moderate inflation, although the durability of this trend still needs to be confirmed, MNB governor Mihaly Varga said after the meeting.

Hungarian long-term government bond yields have edged lower, with risk premia remaining below pre-election levels and narrowing compared with both German and Polish benchmarks.

Hungary's inflation outlook is being shaped by opposing forces. Higher energy prices and rising global bond yields warrant caution, while the stronger forint and price caps are helping to contain inflationary pressures, according to the MNB governor. 

Varga stressed a sustained decline in risk premia could widen the leeway of monetary policy. Risk perceptions have improved sharply since the election, driven by expectations that Hungary could secure EU funds and by the government's plans to adopt the euro, he said.

Hungary should strive to ensure that the economy maximises the benefits and that exporters are not harmed by a possible real appreciation of the forint. In recent weeks, several companies in the manufacturing and agri-food sectors have expressed concern about the rapid appreciation of the currency, which has further undermined their competitiveness.

The MNB emphasised that the persistence of recent favourable trends could increase policy flexibility, though a cautious, patient stance will remain necessary, as price stability requires tight monetary conditions.

Varga said anchoring inflation expectations will also be key to bringing inflation down to the 3% target, which can be reached sustainably by H2 of 2027. The MNB can help to achieve these goals by maintaining positive real interest rates, he said, reiterating that restrictive monetary conditions remain necessary and that policy decisions will remain data-driven.

Varga confirmed that two options were on the table at the meeting, including a rate cut, but the majority voted to keep rates unchanged, while one decision-maker voted to ease monetary conditions. 

 GDP grew by 1.7% in Q1, driven mainly by the services sector, while industry also contributed positively. He added that one-off technical factors may have also played a role in the outcome.

A Portfolio.hu survey of around a dozen Hungarian analysts conducted ahead of the meeting found that half of the respondents expect the MNB to cut the base rate to 5.50% by December, while four analysts foresee a year-end rate of 5.75% and two expect rates to remain unchanged. For end-2027, the consensus forecast stands at 5.00%.

Brokerage Equilor noted that the central bank communication was broadly in line with expectations. It said the MNB has opened the door to a potential rate cut at the June meeting if external inflation risks ease in the coming weeks and favourable domestic trends, such as a stronger forint and lower risk premia, prove durable.

The forint gained slightly against the euro and the dollar after the rate decision.

Equilor said that the EUR/HUF currency pair has fallen below a key long-term (15-year trendline) support level of 360 in recent days, the strongest level in four years. However, short-term technical indicators suggest a possible correction, it added.