WOOD Flash – Hungary macro: MNB reinforces the hawkish stance
Yesterday (17 December), the Monetary Council of the MNB kept the base rate unchanged at 6.50%, as expected. The decision was passed by a broad majority, with only one dissenting vote seeking a 25bp cut. Deputy Governor Virag spoke after the meeting and reaffirmed the hawkish tone, suggesting that risks to the inflation outlook remain to the upside, stemming from pressures on the HUF, and that monetary policy will remain on an extended pause. This was backed by an upward revision to next year’s inflation forecast, which has delayed the return to the 3% target to 2026E. The incoming MNB Governor, Mihali Varga, who is currently serving as Finance Minister, will inherit a challenging role from March next year, with the economy contracting but upside risks to inflation still intact. Looking ahead, we expect the policy rate to remain on hold until the middle of next year, before being reduced to 5.00% by end-2025E and 4.00% by end-2026E.
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