Live Updates > Live Update Details
2025-12-16 21:09:23
[Hungarian Central Bank's Pre-Election Balancing Strategy: Balancing Inflation and Exchange Rate] ⑴ The Hungarian central bank, as expected, kept its benchmark interest rate unchanged at 6.5% on Tuesday, marking the 15th consecutive month of stabilization. ⑵ This policy meeting comes amid uncertainty about the domestic inflation outlook and the approaching parliamentary elections (potentially in April), reflecting a cautious approach. ⑶ The central bank will release new inflation forecasts later on Tuesday, with a downward revision to the 2026 inflation outlook expected, as the governor previously hinted that average inflation next year might be below 3.8%. ⑷ Some analysts believe this even opens the door to a small rate cut before the election, making Tuesday's central bank statement a key indicator of a policy shift. ⑸ Deutsche Bank analysis suggests that Hungary may experience a more significant slowdown in inflation in the short term, thanks to a stronger forint and government price controls that will likely continue at least until the election. ⑹ While the market perceives the central bank's stance as hawkish, a rate cut before the election is still anticipated, provided the forint remains stable and inflation falls below target. ⑺ The central bank stated that the December inflation report will be crucial in determining the stance of monetary policy next year. (8) High interest rates have supported the forint's appreciation against the euro by nearly 7% this year, but uncertainty surrounding the outcome of the 2026 election has introduced uncertainty into the fiscal outlook and the future of existing price control policies.
