Press release on the Monetary Council meeting of 23 June 2026

23 June 2026

At its meeting on 23 June 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 24 June 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.

The global economic environment may stabilise gradually after the signing of the agreement between the United States and Iran, as well as the unblocking of the Strait of Hormuz. Global oil prices and European gas prices have begun to decrease but still remain above their levels before the conflict in Iran.

The European Central Bank raised its policy rates by 25 basis points, while the Federal Reserve left interest rates unchanged in June. The Bank of Japan decided to raise interest rates by 25 basis points. The Czech central bank raised its policy rate by 25 basis points. Regarding the world’s leading central banks and central banks in the CEE region, markets price in rising interest rate levels. Long-term yields in developed markets are high, even in a historical comparison.

The pick-up in domestic demand contributed the most to the 1.7 percent rise in Hungary’s GDP in 2026 Q1, while net exports held it back. In April, retail sales and industrial production both increased. 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.

In 2026, the pick-up in domestic economic activity is primarily driven by household consumption. EU funds becoming available may boost investments, and the growth effect thereof may occur gradually. The growth of Hungary’s export markets may be slower, resulting in a more moderate external demand. Based on the June forecast, Hungary’s GDP will rise by 2.0 percent in 2026, 3.0 percent in 2027, and 2.9 percent in 2028. The current account balance will temporarily deteriorate this year then remain close to the equilibrium level.

In May, inflation and core inflation decreased to 1.8 percent and 2.0 percent, respectively. The decline in the rate of price increases can be attributed to the slowing price dynamics of food and industrial goods, which was supported by the stronger forint’s disinflationary effect. Household inflation expectations decreased significantly in recent months, while corporate price expectations rose slightly as a result of the prolongation of the conflict in Iran.

The inflation path in the June forecast significantly shifted downwards compared to the March Inflation Report. The stronger forint, as well as the decline in energy and food prices has resulted in lower inflation. With the easing of the conflict in Iran, market fuel prices are declining below the level of fuel price caps. For the rest of this year and next year the rate of price increases will remain below the central bank’s 3 percent target. On annual average, inflation will be 1.8 percent this year, 2.3 percent in 2027, and 3.0 percent in 2028. Even if price margin caps were immediately withdrawn, inflation would still not rise above the central bank’s 3 percent target. Thus, repealing the measure would not endanger price stability.

According to the Monetary Council’s risk assessment, the baseline scenario in the June forecast is surrounded by balanced inflation and upside growth risks. The alternative scenarios highlighted by the Council assume declining risk premium due to improving domestic fundamentals, persistently lower inflation expectations, capital withdrawals from emerging markets, and rising wage growth.

In the Monetary Council’s assessment, the euro sale transactions related to energy import coverage contributed effectively to maintaining stability in the foreign exchange market in the first weeks of the conflict in Iran. Taking into account the easing of energy market risks and favourable financial market developments, the Monetary Council decided that the instrument will remain available until 30 June 2026.

The June forecast confirmed that the inflation outlook has improved significantly. With the easing of geopolitical tensions, the global risk environment has become more favourable. The lower risk premium on domestic assets remained, to which the agreement between Hungary’s government and the European Commission, related to EU funds, contributed. These factors significantly increase the room for monetary policy to manoeuvre. Looking ahead, Hungary’s risk assessment will be primarily influenced by expectations regarding the fiscal path and the adoption of the euro.

The Monetary Council reduced the base rate by 25 basis points to 6.00 percent at today’s meeting. The O/N deposit rate and the O/N lending rate decreased to 5.00 percent and 7.00 percent, respectively.

The Monetary Council is committed to the achievement of 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, is crucial in anchoring inflation expectations and thus achieving price stability.

Looking ahead, if favourable developments persist, the Council – while maintaining a positive real interest rate – sees room for further interest rate cuts throughout the summer, with a decision on their 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 8 July 2026.

MAGYAR NEMZETI BANK
Monetary Council