Press release on the Monetary Council meeting of 24 March 2026

24 March 2026

At its meeting on 24 March 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 25 March 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.

Heightened geopolitical tensions had an adverse effect on the global economy’s outlook for growth and inflation, as well as investor sentiment. As a result of the Iranian conflict, global energy prices increased significantly. The price of Brent crude oil temporarily rose to close to USD 120/barrel, and European gas prices were up by more than 70 percent since the eruption of the war. The surge in energy prices and the increase in risk aversion significantly have raised global inflation risks.

In March, the European Central Bank and the Federal Reserve left interest rates unchanged. The Polish central bank lowered its policy rate, while the Czech central bank left its policy rate unchanged.

In 2025 Q4, Hungary’s GDP rose by 0.8 percent. Hungary’s real economy is still characterised by duality. GDP growth is primarily supported by an expansion in household consumption, while investments and net exports hold it back. In January, retail sales continued to grow, while the volume of industrial production remained subdued. The tightness of the labour market is easing, whereas the unemployment rate still remains low in a historical comparison.

Economic activity this year will strengthen further, however, the geopolitical events of recent weeks have slowed down the pick-up in growth. Similarly to the previous year, the main driver of growth is expected to be household consumption in 2026. Due to rising real wages and the government’s income-increasing measures for households, consumption will expand over the entire forecast horizon. Surging energy prices slow down the growth of Hungary’s export markets as well. However, the capacity-increasing investment projects of recent years help the expansion of industrial exports. After a temporary decline this year, the current account surplus will be around 1 percent of GDP at the end of the forecast horizon, thanks primarily to the gradual increase in the trade balance. Domestic GDP may rise by 1.7 percent in 2026, 3.0 percent in 2027, and 2.9 percent in 2028.

In February 2026, inflation and core inflation declined to 1.4 percent and 2.1 percent, respectively. The fact that January and February repricings were at one of the lowest levels observed in past decades played a significant role in the decline, which was supported by the decrease in global food prices and the stronger forint’s disinflationary effect. In 2026 Q1, companies’ price expectations showed subdued dynamics overall. Households’ inflation expectations declined.

Favourable repricings at the start of the year and energy prices surging as a result of the Iranian conflict, have an opposing effect on inflation. The extension of price margins restrictions until the end of May results in prices increasing at a slower rate this year, while increasing at a higher rate in 2027 compared to the December forecast. From March onwards, the rate of price increases will rise as a result of the pass-through of the higher energy prices. However, this will be temporarily mitigated by the impact of the price caps introduced for fuels. From 2026 Q3 onwards, inflation will rise above the tolerance band and is expected to return to the central bank target in a sustained manner in 2027 H2. On average annually, inflation will be 3.8 percent in 2026 and 3.7 percent in 2027.

Based on the Monetary Council’s risk assessment, the baseline scenario in the March projection is surrounded by mostly upside risks to inflation and downside risks to growth. The risk scenarios highlighted by the Council presume prolonged geopolitical tensions, a faster growth in consumption, and slower-than-expected improvement in external economic activity.

In the current economic environment, 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. A stability-oriented monetary policy approach and the continued, cautious analysis of the impact of international developments on the inflation outlook are warranted. After the eruption of the Iranian conflict, on 10 March, the Monetary Council decided to meet major foreign exchange liquidity needs arising from covering energy imports. This ensures the supply and demand balance in the foreign exchange market even through turbulent periods.

The Monetary Council left the base rate unchanged at 6.25 percent at today’s meeting. The O/N deposit rate and the O/N lending rate also remained unchanged, at 5.25 percent and 7.25 percent, respectively. The central bank will continue to ensure positive real interest rates in order to achieve the inflation target in a sustainable manner.

A careful and patient approach to monetary policy remains necessary due to inflation risks arising from geopolitical tensions and the uncertain financial market environment. The Monetary Council is committed to the achievement of the inflation target in a sustainable manner. Maintaining tight monetary conditions is warranted. The Council is constantly assessing the impact of incoming macroeconomic data and financial market developments on the inflation outlook, 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 15 April 2026.

MAGYAR NEMZETI BANK
Monetary Council