The Monetary Council of the Hungarian National Bank (MNB) unanimously decided to keep the base interest rate unchanged in March, according to minutes published on the central bank’s website on Wednesday.
The decision was discussed as a single proposal, resulting in the base rate remaining at 6.25%. The interest rate corridor also stayed unchanged: the overnight (O/N) deposit rate remains at 5.25%, while the overnight lending rate, the upper bound of the corridor, remains at 7.25%.
The council emphasized that in the current environment, a cautious and patient monetary policy is still necessary, reaffirming its commitment to achieving the inflation target sustainably. Policymakers agreed that maintaining tight monetary conditions is justified.
They also noted that geopolitical developments during the month significantly increased uncertainty in financial markets, as well as in global growth and inflation outlooks. At the same time, incoming data—such as Hungary’s 1.4% inflation rate in February—confirmed that pricing trends remain favorable.
However, the council warned that rising global oil and gas prices linked to the Iranian conflict, along with increased risk aversion and volatility in the Hungarian forint market, pose upward risks to inflation. Still, they highlighted that compared to the period before the 2022 energy crisis, Hungary’s economic fundamentals are now stronger.
According to the council, although the March inflation forecast is higher than the one published in December, the inflation target is still expected to be achieved sustainably by the second half of 2027. The upward shift in the inflation path is mainly attributed to the effects of the Iranian conflict. Overall, the outlook is surrounded by upside inflation risks and downside risks to economic growth.
Several members stressed that the persistence of the energy market shock will be a key factor in future decisions and risk assessments. Some policymakers added that the council must be ready to respond appropriately if inflation risks deviate upward from the baseline scenario.
The council concluded that, in the current fragile period, a stability-oriented approach is warranted. Maintaining financial market stability is essential for sustainably achieving the inflation target, and the MNB can best contribute through credible and predictable monetary policy.
The Monetary Council will continue to assess incoming macroeconomic data and financial market developments when making decisions on the base rate. Its next rate-setting meeting is scheduled for April 28, with a summary of the minutes to be published on May 13.
(MTI)
