Hungary’s National Bank maintained its benchmark interest rate at 6.50% on November 18, 2025, matching market expectations and continuing a steady policy stance since January. This decision comes amid a complex macroeconomic environment marked by elevated inflation, moderate growth, and external uncertainties.

Drivers this month

• Inflation remains sticky at 8.30% YoY, driven by food and energy prices.
• GDP growth slowed to 2.10% in Q3 2025, down from 3.00% a year ago.
• Fiscal tightening with a government budget deficit narrowing to 2.80% of GDP.
• Geopolitical tensions in Eastern Europe continue to pressure energy markets.

Policy pulse

The 6.50% rate sits well above the historical average of 4.20% over the past decade, reflecting the central bank’s commitment to anchoring inflation expectations amid persistent price pressures. The unchanged stance signals a wait-and-see approach, balancing inflation control with growth support.

Market lens

Immediate reaction: The Hungarian forint (HUF) depreciated 0.30% against the euro within the first hour post-announcement, while 2-year government bond yields edged up by 5 basis points, reflecting cautious investor sentiment.

Core macroeconomic indicators underpin the central bank’s decision. Inflation remains the primary concern, with headline CPI at 8.30% YoY in October 2025, slightly down from 8.50% in September but still well above the 3% target. Underlying inflation excluding volatile items hovers near 6.70% YoY.

Inflation trends

• Food prices contributed 2.10 percentage points to headline inflation this month.
• Energy inflation eased marginally to 12.40% YoY from 13.10% last month.
• Services inflation remains sticky at 5.80% YoY, reflecting wage pressures.

Growth and labor market

GDP growth moderated to 2.10% YoY in Q3 2025, down from 3.00% in Q3 2024. Industrial output slowed, while services and construction showed resilience. Unemployment remains low at 3.70%, supporting domestic demand but also feeding wage-driven inflation.

Fiscal policy & budget

The government’s fiscal deficit narrowed to 2.80% of GDP in Q3, down from 3.50% a year earlier, reflecting tighter spending and improved tax collection. This fiscal consolidation supports monetary policy but limits stimulus options.

Interest rate stability

The rate’s stability signals the bank’s confidence in current policy calibration but also highlights the challenge of balancing inflation control with growth risks.

Inflation vs. interest rate

While inflation remains elevated, the lack of further rate hikes suggests a cautious approach, possibly awaiting clearer signs of inflation deceleration.

Market lens

Immediate reaction: The 2-year Hungarian government bond yield rose 5 basis points, while the HUF weakened 0.30% against the EUR, reflecting investor caution and uncertainty about future tightening.

Looking ahead, Hungary’s monetary policy faces a delicate balancing act. Inflation remains the key risk, but growth is slowing and external shocks persist. The central bank’s forward guidance suggests patience, with rate hikes unlikely unless inflation surprises on the upside.

Bullish scenario (20% probability)

• Inflation falls rapidly below 5% by mid-2026 due to easing energy prices and fiscal discipline.
• GDP growth stabilizes near 3%, supporting employment and consumption.
• Central bank begins rate cuts in Q3 2026, boosting credit and investment.

Base scenario (60% probability)

• Inflation gradually declines to 4.50% by end-2026, remaining above target.
• Growth remains modest at 2%, constrained by global uncertainties.
• Interest rates stay at 6.50% through 2026, with possible minor adjustments.

Bearish scenario (20% probability)

• Inflation remains sticky above 7% due to renewed energy shocks and wage pressures.
• Growth slows below 1%, risking stagflation.
• Central bank forced to hike rates above 7% in early 2026, tightening financial conditions.

Hungary’s interest rate decision reflects a cautious central bank navigating persistent inflation and slowing growth. The steady 6.50% rate underscores a commitment to price stability amid external and domestic challenges. Fiscal consolidation supports this stance, but geopolitical risks and energy price volatility remain key uncertainties. Financial markets remain watchful, pricing in a steady policy with risks skewed to the upside. The coming months will test the central bank’s ability to balance inflation control without stifling growth.

Key Markets Likely to React to Interest Rate Decision

The Hungarian forint (HUF) and local government bonds are the most sensitive to the interest rate decision, reflecting changes in monetary policy expectations. The EUR/HUF currency pair typically reacts to shifts in rate outlooks, while Hungarian sovereign bonds adjust yields accordingly. Additionally, the OTP bank stock is closely tied to domestic interest rates, influencing lending margins. On the forex front, the EURHUF pair is a direct barometer of monetary policy sentiment. In crypto, the BTCUSD pair often reflects risk appetite shifts triggered by central bank moves.

Indicator vs. OTP Stock Since 2020

FAQs

What was Hungary’s latest interest rate decision?

Hungary’s central bank held the key interest rate steady at 6.50% in November 2025, unchanged from previous months.

How does the interest rate affect Hungary’s economy?

The rate influences borrowing costs, inflation control, and currency stability, impacting growth and investment.

What are the risks to Hungary’s monetary policy outlook?

Risks include persistent inflation, energy price shocks, geopolitical tensions, and slower-than-expected growth.

Takeaway: Hungary’s steady 6.50% interest rate reflects a cautious central bank balancing persistent inflation against slowing growth and external risks, signaling a watchful pause in monetary tightening.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.