Press release on the Monetary Council meeting of 16 December 2025

16 December 2025

At its meeting on 16 December 2025, the Monetary Council reviewed the latest economic and financial developments and decided on the following structure of central bank interest rates with effect from 17 December 2025:

The primary objective of the Magyar Nemzeti Bank (MNB) is to achieve and maintain price stability. Without prejudice to its primary objective, the Magyar Nemzeti Bank preserves financial stability and supports the Government’s economic policy, as well as its policy on environmental sustainability.

Prolonged trade and geopolitical tensions continue to pose a risk to the slightly improving global economic growth. Germany’s economic performance remains subdued. Globally, inflation is moderating slowly, while consumer price increases in the euro area are around the central bank’s target.

International investor sentiment has somewhat improved since the previous interest rate decision. At its December rate-setting meeting, the Federal Reserve reduced the target range for the federal funds rate by 25 basis points as markets price in further interest rate reductions looking ahead. Markets expect the European Central Bank to keep the key policy rate unchanged. In the CEE region, the Polish central bank reduced its policy rate by 25 basis points, while the Czech and the Romanian central banks left interest rates unchanged.

Hungary’s real economy continued to be characterised by duality in 2025 Q3: household consumption supported GDP growth, while investments and net exports held it back. As a result of persistently weak economic performance, the tightness of the labour market has eased during the past quarters, while the unemployment rate remains low in a historical comparison.

From next year onwards, both internal and external factors will contribute to the pick-up in growth. Due to rising real wages and the government’s income-increasing measures for households, consumption will support growth over the entire forecast horizon. At the same time, higher budgetary expenditure will make it more difficult to reduce the public debt-to-GDP ratio. In addition to the gradual recovery of Hungarian export markets, the capacity-increasing investment projects of recent years also support the expansion of industrial exports. The current account surplus will remain steadily around 2 percent of GDP. Hungary’s economy is expected to expand by 0.5 percent in 2025, 2.4 percent in 2026, and 3.1 percent in 2027.

In November, inflation and core inflation fell to 3.8 percent and 4.1 percent, respectively. The decrease in global commodity and food prices and the pass-through of a stronger forint into purchase prices support disinflation. In recent months, both the representative consumer basket and the core inflation product range have been characterised by more moderate monthly repricings than in the first half of the year. Companies’ short-term price expectations showed subdued dynamics in November as well. However, households’ inflation expectations remain stagnant.

Corporate repricings at the start of the year, as well as the timing of the withdrawal of price margin restrictions and the effects thereof carry uncertainty regarding the inflation outlook. According to the MNB’s projection, the rate of price increases will briefly decline below the 3 percent inflation target before temporarily rising close to the tolerance band’s upper bound. While the consumer price index remains volatile, underlying inflation is projected to evolve more favourably over the coming year relative to the September forecast due to a stronger forint and an improved external cost environment. On an annual basis, consumer prices are expected to rise by 4.4 percent in 2025, 3.2 percent in 2026, and 3.3 percent in 2027. The 3 percent inflation target may be achieved in a sustainable manner in 2027 H2.

Based on the Monetary Council’s risk assessment, the baseline inflation projection in the December Inflation Report is surrounded by balanced risks. The highlighted alternative scenarios presume a faster growth in consumption, slow moderation in inflation expectations, easing geopolitical tensions, and slower-than-expected improvement in the European economy.

Monetary policy contributes to the maintenance of financial market stability, the anchoring of inflation expectations consistently with the central bank target and, as a result, to the achievement of the inflation target in a sustainable manner by ensuring positive real interest rates.

In order to ensure the continuing stability of financial markets and the effective transmission of monetary policy, the MNB’s regular FX swap tenders and discount bill auctions will be announced with a longer maturity as well in December.

In line with the stability-oriented approach, the Monetary Council left the base rate unchanged at 6.50 percent at today’s meeting. The O/N deposit rate and the O/N lending rate also remained unchanged, at 5.50 percent and 7.50 percent, respectively.

The Monetary Council is committed to the achievement of the inflation target in a sustainable manner. A careful and patient approach to monetary policy remains necessary due to risks to the inflation environment. In the Council’s assessment, maintaining tight monetary conditions is warranted. The Council is constantly assessing incoming macroeconomic data and factors influencing the inflation outlook, in particular repricings at the start of the year and the stability of financial markets, based on which it will take decisions on the level of the base rate in a cautious and data-driven manner from meeting to meeting.

The abridged minutes of today’s Council meeting will be published at 2 p.m. on 14 January 2026.

MAGYAR NEMZETI BANK
Monetary Council