The Monetary Council of the National Bank (MNB) left the base rate unchanged at 6.5% with the overnight deposit and lending rates maintained at 5.50% and 7.50% respectively at a monthly policy meeting on April 29, in line with expectations. The MNB last changed the benchmark lending rate in September.

Speaking after the rate decision, MNB Governor Mihaly Varga said the MNB’s inflation outlook had become more uncertain due to rising trade tensions.

Financial market volatility has triggered a rise in risk aversion, which could put pressure on Hungarian assets and feed into inflationary pressures, the bank noted.

These developments, he noted, justify maintaining tight monetary conditions and achieving inflation targets requires a "careful and patient, stability-oriented monetary policy." He added that the current interest rate may remain in place for an extended period. underscoring analysts’ view that the MNB’s dovish turn is not yet around the corner.

While both headline and core inflation eased in March, the price dynamics of food and market services were strong and inflation expectations of households and companies remained high. Varga augured that inflation would fall further in April and dip below the top end of MNB's 4% tolerance band in the coming months. Anchoring inflation expectations is essential to achieving price stability, he stressed.

On macroeconomic outlooks, the MNB’ said domestic demand is forecast to recover further this year, supported by rising real wages and tax cuts, though industrial output and investment remain vulnerable to global headwinds. Labour market tightness has eased, but employment remains historically high.

The MNB warned that international financial volatility and weakening external demand could dampen Hungary’s growth outlook.

Varga did not specify the specific impact of the trade war, but said that it would curb exports and lead to a delay in investments. The MNB earlier forecast that in the worst-case scenario, Hungary’s GDP would be 0.5pp lower.

Varga said that the country’s financial and capital market perception remained stable, underpinned by strengthening macroeconomic fundamentals. The central bank highlighted that resilience in key indicators has helped Hungary maintain market confidence despite recent global volatility. MNB expects growth to resume without jeopardising internal or external balance and sees GDP rising 1.9-2.9% this year.

Other fiscal indicators, watched by credit rating agencies, are improving with the budget’s primary balance projected to be neutral this year and public debt is set to decline in 2025. Asked whether MNB's growth projections would be revised, Varga said the decision would depend on Q1 GDP data, released on Wednesday, April 30.

Fielding questions, Varga said the MNB's new management was committed to transparency and was in the process of "rationalising" the central bank's operations. He added that the MNB had to focus on its primary tasks, such as achieving price stability, and didn't need to operate foundations.

His comments came as the State Audit Office launched a probe into the dealings of MNB foundations under the former central bank leadership led by Gyorgy Matolcsy. He said talks with the government on amendments to the Central Bank Act had finished and a bill could be submitted to lawmakers.

The forint traded at 404.26 to the euro on Tuesday afternoon, firming from 404.49 late Monday.