Business as usual: no policy change at today's monthly Monetary Council meeting

HUNGARY - In Brief 26 Aug 2025 by Istvan Racz

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The MNB base rate and the interest rate corridor have been kept unchanged, at 6.5% and 5.5-7.5%, respectively, and the Council saw no reason to change its forward guidance either. This outcome was in conformity with the MNB's previous communication and analyst expectations alike. In Portfolio.hu's regular monthly poll, all participants expected an unchanged base rate for August. For end-2025, four analysts expected the base rate unchanged from the current level, but two respondents predicted 6.25% and another two expected 6%. This poll result pretty much corresponds to our feelings. As we wrote the July update of our forecast, we still expected a 25 bps base rate cut, to 6.25%, at some point in Q4, but after the recent announcement of the government's cheap mortgage loan scheme, and also seeing the pickup in the government's spending on EU-backed development programs, we are not that sure any more that it will indeed happen. In our view, the September rate-setting meeting of the Monetary Council, also the occasion when the Q4 inflation report is to be discussed, will be the key event to watch for further guidance in that regard. On this subject, we wrote a bit more in detail in our August monthly, published a week ago. The press conference held by Governor Varga after today's meeting did not really give away much detail. Responding to a question, Mr. Varga said that the government's price caps have been extended until November 30. We firmly believe that the new expiration date is only a formality: once we get close to that date, the caps will be most likely extended again, and they will be maintained at least until after the April election. Mr. Varga also confirmed tha...