By Gergely Szakacs
BUDAPEST (Reuters) -Hungary’s central bank left its base rate on hold at the European Union’s joint-highest 6.5% level on Tuesday, as widely expected, marking a year-long pause in rate easing amid higher inflation and price risks looming in 2026.
All 20 economists surveyed between September 15 and 18 said the bank would leave its main rate steady, on a par with that of neighbouring Romania, where government tax hikes to curb the EU’s highest budget deficit have triggered a surge in prices.
Hungary’s inflation ran unchanged at an annual 4.2% in August based on Eurostat figures, central Europe’s second-highest rate behind that of Romania, and above the National Bank of Hungary’s (NBH) 2-4% tolerance band.
“Markets widely expect (NBH) to maintain unchanged rates for some quarters to come,” Commerzbank economist Tatha Ghose said.
FORINT GAINS ON FED RATE CUT, VARGA’S COMMENTS
The forint scaled a 15-month high last week as it benefited from a higher interest rate differential after the U.S. Federal Reserve cut the cost of borrowing for the first time this year.
It has also benefited from central bank Governor Mihaly Varga saying this month that Hungary should not build an economic strategy on devaluing its currency, which has weakened sharply since Prime Minister Viktor Orban took power in 2010.
The forint’s gains could help curb inflation, but with Orban capping food prices and some service sector companies postponing price hikes until after an election due next April, there is a risk of inflation resurging after the vote.
“Under Varga, (NBH) has jettisoned monetary easing far more conclusively than the previous MPC had done. Low GDP growth and political pressure does not seem to be significant considerations either, for now,” Commerzbank’s Ghose said.
“This sober monetary stance will continue to support the forint exchange rate.”
(Reporting by Gergely Szakacs; Editing by Bernadette Baum)
