Hungary's National Bank cuts base interest rate to 8.25% amid inflation goals

The Monetary Council of the National Bank of Hungary (MNB) announced a reduction in the base interest rate by 75 basis points, bringing it down to 8.25 percent on Tuesday. This move aligned with most analysts' expectations.

The reduction to 8.25 percent marks the sixth consecutive cut of this nature. However, the cut made last month was more significant, amounting to 100 basis points. Following that adjustment, the forint experienced a depreciation against the euro and the dollar, flirting with the 400 forints per euro mark once again in March.

The MNB stated that it prioritizes its inflation target over the currency's reaction. Nevertheless, the recent 75 basis-point reduction signifies a return to a more prudent approach after the singular instance of a 100 basis-point cut.

Interest rates have now substantially fallen from their peak at 13 percent. Key figures, including the Minister of Economy Márton Nagy and the President of the Chamber László Parragh, as cited by Hungarian media, have expressed that the pace of these cuts may not be swift enough.

Inflation in Hungary has decreased to 3.7 percent, approaching the central bank's goal of 3 percent. The country had previously led the European Union in inflation rates for almost two years. The highest inflation rate recorded was in January 2023, reaching a year-over-year rate of 25.7 percent.