Press release on the Monetary Council meeting of 20 October 2026

20 October 2026

At its meeting on 20 October 2026, the Monetary Council reviewed the latest economic and financial developments and decided on the following structure of central bank interest rates with effect from 21 October 2026:

The primary objective of the Magyar Nemzeti Bank (MNB) is to achieve and maintain price stability. Without prejudice to its primary objective, the MNB preserves financial stability and supports the Government’s economic policy, as well as its policy on environmental sustainability. From 1 January 2028, the inflation target will be set at 2.5 percent.

In the euro area and the United States alike, the inflation rate considerably exceeds the central bank target. Global oil and gas prices are high due to geopolitical tensions, and as such, they have an unfavourable impact on the global inflation outlook. In addition to geopolitical developments, investor sentiment is also determined by risks related to the sustainability of the debt paths of developed markets. In the past weeks, long-term yields, which are high in a historical comparison, have increased further. The US dollar has strengthened.

Based on market pricings, the European Central Bank, the Federal Reserve and the Bank of Japan may further increase policy rates following the previous hikes in September. In the CEE region, the Romanian and Polish central banks decided to keep the key policy rate unchanged in October.

In August, industrial production continued to grow, while the expansion of retail sales slowed down. In September, business confidence rose slightly, and the consumer confidence index remained high in a historical comparison. The unemployment rate has remained low in an international comparison. Real wage growth is strong, but overall, nominal wage dynamics are slowing down. Due to severe drought, declining agricultural output is slowing economic growth this year, although higher industrial exports are partly offsetting the impact.

In September, inflation stood at 1.6 percent, in line with the forecast in the Inflation Report. The increase in the consumer price index was attributable to the accelerating price dynamics of fuels. Food prices continued to decline, while the annual price index of market services rose slightly. Core inflation stood at 1.9 percent. The month-on-month price increase in the core inflation basket was in line with the average of the 2017-2020 period. Households’ inflation expectations, as well as companies’ price expectations for retail sales and services remained at moderate levels.

Increase in inflation for the remainder of 2026 and in 2027 is primarily caused by higher fuel prices and the modification of the excise duty on tobacco products. On an annual average, the rate of price increases will be 1.8 percent this year and 3.1 percent in 2027. Inflation will decline to the central bank’s 2.5 percent target by the end of the monetary policy horizon.

The high level of energy prices, the rising yield environment, as well as the uncertainty surrounding the global economic and financial market outlook warrant a careful approach to monetary policy. Looking ahead, Hungary’s risk assessment will be primarily influenced by the fiscal path, expectations regarding the adoption of the euro, as well as the external market environment.

In the Monetary Council’s assessment, maintaining the current interest rate conditions is necessary to achieve the inflation target in a sustainable manner. The Monetary Council kept the base rate unchanged at 5.50 percent at today’s meeting. The O/N deposit rate and the O/N lending rate also remained unchanged at 4.50 percent and 6.50 percent, respectively.

The Monetary Council is committed to achieving the inflation target in a sustainable manner. In addition to ensuring positive real interest rates, maintaining the stability of financial markets, especially that of the foreign exchange market, supports the anchoring of inflation expectations and thus contributes to achieving price stability. Economic policy measures, as well as their market reception, have an effect on the room for manoeuvre of monetary policy. The Council is constantly assessing the inflation outlook, global developments, and Hungary’s risk premia, based on which it will take decisions on the level of the base rate in a cautious and data-driven manner.

The abridged minutes of today’s Council meeting will be published at 2 p.m. on 4 November 2026.

MAGYAR NEMZETI BANK
Monetary Council