Press release on the Monetary Council meeting of 23 September 2025

23 September 2025

At its meeting on 23 September 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 24 September 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.

Ongoing trade and geopolitical tensions continue to create an uncertain global economic environment. The trade agreements concluded in the past months somewhat improved the global growth outlook. However, the economic growth of Germany, Hungary’s most important foreign trade partner, remained subdued.

The increasing fragmentation of international supply chains due to tariffs, the further rise of global food prices, and the continued high price dynamics in market services still pose upside risks to global inflation. Energy prices have remained broadly unchanged since the previous interest rate decision.

International financial markets continue to react sensitively to trade and geopolitical developments. At its September meeting, the Federal Reserve reduced the target range for the federal funds rate by 25 basis points. The interest rate path expected from the central bank shifted downwards. Markets price in two additional 25 basis point interest rate cuts until the end of the year. The European Central Bank left its policy rates unchanged in September. Market expectations for the euro interest rate path shifted slightly upwards. Pricings do not indicate further interest rate cuts for this year. Over the past month, among the regional central banks, the Polish central bank cut the key interest rate by 25 basis points.

Hungarian economy remained subdued in 2025 Q2 as well. The growth of the GDP was primarily driven by the robust growth of household consumption, while the decline in investments continued. Besides the prolonged moderate economic growth, labour market tightness eased. At the same time, the unemployment rate remains historically low.

For the rest of the year, a slow economic recovery is expected, which could be supported by both the strong increase in consumption and the gradually normalising external economy. Agricultural performance declines this year due to drought. As a result, overall, domestic GDP may grow by 0.6 percent in 2025, slower than the June forecast. From the next year onwards, both internal and external factors will support the pick-up in growth. Strong consumption dynamics will remain an important factor of growth over the entire forecast horizon, supported both by rising real wages and government measures. With the improving performance of the European economy and the rising output of the capacity-increasing investment projects in recent years, a faster expansion of exports is expected. The GDP of Hungary may increase by 2.8 percent in 2026 and by 3.2 percent in 2027, at the same pace as in the June forecast.

Domestic lending is still characterised by duality: in July, household lending continued to rise, while no significant turnaround was observed in subdued corporate credit demand. The loan programmes and subsidies announced in recent months come into effect on an already active housing market. Therefore, the annual growth of household loans outstanding could be 17–20 percent at the end of 2025 and 18–22 percent in 2026. According to the MNB’s forecast, corporate loans outstanding may rise by 2.0 percent in 2025 and 2026 as well. The capitalisation and liquidity position of the Hungarian banking system is strong and capable of satisfying even a signficantly greater credit demand.

In August, inflation was 4.3 percent, similar to the previous month, and core inflation fell to 3.9 percent. Mandatory and voluntary price restriction measures had a significant diminishing effect on inflation, however, strong corporate repricings can still be observed outside their scope. The forint has been strengthening overall since the beginning of the year, and its favourable effects are increasingly seen in manufacturing producer prices and import prices. Short-term corporate price expectations showed subdued dynamics in August. Household inflation expectations decreased slightly, but remain at a high level.

For the rest of the year, inflation is expected to stay above the central bank tolerance band. The rate of price increases may decline persistently to the tolerance band in early 2026 and reach the 3 percent inflation target in early 2027. Compared to the June forecast, on an annual average, the consumer price index may be slightly lower at 4.6 percent this year and slightly higher at 3.8 percent in 2026. Inflation is expected to be 3.0 percent in 2027. In the baseline scenario, price stability can be achieved in a sustainable manner by ensuring tight monetary conditions.

The current account balance showed a surplus of EUR 241 million in July. In parallel with an upswing in domestic demand, the current account surplus will undergo a slight temporary decline in 2025 as a whole. However, from early 2026 onwards, with increasing external demand and the rising output of new investments, the external balance position will gradually improve. As a result, the current account surplus is expected to be around 1.3 percent of GDP in 2025, 1.4 percent in 2026 and 1.6 percent in 2027, slightly lower than the June forecast.

The fiscal deficit may decrease further in 2025 in parallel with the gradual decrease in interest expenditures of the Government. The primary balance may be close to balanced budget levels over the entire forecast horizon. The governmental measures announced during the summer are expected to have a moderate impact on the budget in 2025. From 2026 onwards, however, their deficit-increasing impact may grow. Public debt reduction in 2025 is impeded by the cash deficit expected to be higher than the appropriation and subdued economic growth. However, with the expected gradual decrease of the deficit, the debt-to-GDP ratio may moderate again by the end of the forecast horizon.

According to the Monetary Council’s risk assessment, the baseline scenario in the September projection is surrounded by mostly upside risks to inflation and downside risks to growth. The scenarios highlighted by the Council assume stronger consumption growth, escalating geopolitical tensions, and prolonged weak growth in Europe.

In the current macroeconomic environment, the Bank can make the most effective contribution to the easing of economic agents’ increased precaution and to sustainable economic growth by achieving price stability and maintaining financial market stability. Restrictive 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. At the end of the quarter, the MNB continues to strengthen market stability with T/N FX swap tenders announced on a daily basis and weekly discount bill auctions.

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 as well as trade policy and geopolitical tensions. In the Council’s assessment, maintaining tight monetary conditions is warranted.

The abridged minutes of today’s Council meeting will be published at 2 p.m. on 8 October 2025.

MAGYAR NEMZETI BANK
Monetary Council