GKI: High base rate, low inflation?

By: Trademagazin Date: 2026. 03. 24. 12:55

🎧 Hallgasd a cikket: Nyelv: Sebesség: 1.05×

At its interest rate-setting meeting on Tuesday, the Monetary Council kept the base rate at 6.25%, in line with analysts’ expectations. Looking at the inflation data, this may come as a surprise: the era of drastic price increases in 2022-2023 is over, even if consumers’ inflation perception is still high.

Compared to 2024, the rate of price increases was higher in 2025 (+3.7% and +4.4%), thus last year Europe’s 3rd highest values were registered. At the same time, by the end of 2025, the consumer price index began to moderate, and the price increases at the beginning of 2026 also remained modest, so after a long time, the rate of domestic price increases was finally slightly below the average of our regional competitors.

Consumer price index of the V4 countries and the Eurozone (compared to the same period of the previous year, %)

Source: Eurostat

The favorable price development is largely due to The new central bank leadership’s strict monetary policy played a role. The high base rate supported the forint, and the strengthening domestic currency reduced import prices. The high interest rates also shifted market participants from consumption to savings (even if the impact was more moderate in our country due to interest-subsidized loans), thus reducing the demand-driven price increase.

The consolidation of international energy prices and the decrease in EU producer prices reduced inflationary pressure until early March. In addition, the government’s administrative measures (e.g. margin freeze, “voluntary” commitments by the telecommunications, banking and insurance sectors) also curbed the pace of price increases in the short term (while distorting the logic of the market economy).

Development of base interest rates in our region and the Eurozone (%)

Source: Bank for International Settlements

In February – in light of the favorable data – the The Monetary Council considered the time to cut interest rates to be right. The forint exchange rate did not change significantly on the news of the easing, which is a sign that the market was expecting the decision. After the interest rate cut, analysts speculated whether the reduction of the Hungarian base rate – which is quite high in regional comparison – could continue in March.

The cautious optimism was overridden by the Iranian conflict: the forint became volatile and weakened, while international energy prices soared. The situation in the Middle East remains to be resolved, increasing uncertainty and inflation risks, significantly limiting the room for maneuver of monetary policy.