Press release on the Monetary Council meeting of 21 July 2026

21 July 2026

At its meeting on 21 July 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 22 July 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.

Global investor sentiment continues to be shaped by geopolitical developments in the Middle East. Tensions between the USA and Iran appear to be escalating, and there is increased uncertainty regarding the resolution of the conflict. Global oil prices and European gas prices have risen in recent weeks.

Markets expect both the European Central Bank and the Federal Reserve to hike interest rates once before the end of the year. The Bank of Japan may also continue to raise its policy rate. In the CEE region, the Polish and Romanian central banks left their policy rates unchanged in July. Long-term yields in developed markets remain high in a historical comparison and have increased in the past month.

Domestic industrial production and retail sales continued to increase in May. Private sector wage dynamics were slower than in previous years, but there was a strong rise in real wages. The unemployment rate remains low in an international comparison. Based on incoming data, the macroeconomic outlook is in line with the June forecast.

In June, inflation declined to 1.7 percent, while core inflation remained unchanged at 2.0 percent. Incoming data were below expectations and the forecast in the June Inflation Report. The decline in the rate of price increases can be attributed to the slowing price dynamics of food. The annual inflation of tradables rose to 1.2 percent, while the annual price index of market services remained unchanged at 4.9 percent. Households’ inflation expectations have declined since the beginning of the year. Companies’ expectations for retail price changes decreased compared to the previous month, while price expectations for services rose slightly. The rate of price increases will remain below the central bank’s 3 percent target for the rest of the year and throughout next year as well. Inflation will return to the central bank’s target in 2028 H1.

Inflation developments were more favourable than the baseline scenario projected in June, while the lower risk premium on domestic assets persisted. These factors have preserved the Monetary Council’s room to manoeuvre. Looking ahead, Hungary’s risk assessment will be influenced by expectations regarding the fiscal path and the adoption of the euro, as well as the developments in the conflict in the Middle East.

The Monetary Council reduced the base rate by 25 basis points to 5.75 percent at today’s meeting. The O/N deposit rate and the O/N lending rate decreased to 4.75 percent and 6.75 percent, respectively.

The Monetary Council is committed to achieving the inflation target in a sustainable manner and constantly assesses the inflation outlook, global developments, and Hungary’s risk premium. Maintaining the stability of domestic financial markets, especially that of the foreign exchange market, anchors inflation expectations and thus contributes to achieving price stability.

Looking ahead, if favourable developments persist, the Council – while maintaining a positive real interest rate – sees room to further decrease the base rate throughout the summer, with a decision on the continuation to be made based on the September Inflation Report.

The abridged minutes of today’s Council meeting will be published at 2 p.m. on 5 August 2026.

MAGYAR NEMZETI BANK
Monetary Council