MNB: slower growth, declining inflation expected

The MNB kept its base rate unchanged at 6.5 percent on Tuesday. According to the central bank, the Hungarian economy may show a moderate recovery in the rest of the year, which may be supported by the expansion of consumption and the slow improvement of the external economy. However, agricultural performance is being held back by drought, which is why GDP growth is expected to be weaker than the June forecast, at 0.6 percent in 2025.

Inflation may average 4.6 percent this year, decrease to 3.8 percent next year, and reach the 3 percent target by 2027. According to the central bank, maintaining strict monetary conditions is necessary to ensure price stability in the long term.

Regarding the budget outlook, the central bank highlighted that the reduction in government interest expenditure could improve the balance this year, but at the same time, the government’s measures could have a deficit-increasing effect from 2026.

As a result of the new loan programs in the housing market, household credit is expected to increase by 17–20 percent this year and 18–22 percent next year. Corporate lending may also expand by 2 percent in 2025 and 2026.

MNB Chairman Mihály Varga emphasized that the strengthening forint helps to reduce inflation, but at the same time, the decisions of the Monetary Council are not only influenced by the development of the price index, but also by several macroeconomic factors.