Hungary, Kyrgyzstan Hold Key Interest Rates Amid Inflation Pressures

Hungary's National Bank has kept its key interest rate steady at 6.5% for the eleventh consecutive month, maintaining the highest borrowing cost in the European Union alongside Romania. This decision aligns with market expectations and reflects the central bank's cautious approach amid persistent inflation pressures, with headline inflation at 4.3% in July, above the 3% target and the bank's 4% tolerance threshold. Despite slow economic growth, with Q2 2025 GDP increasing only 0.1%, policymakers prioritize currency stability and inflation control to prevent premature monetary easing. Analysts remain divided on the prospect of rate cuts later in 2025, though some foresee a possible 25-basis-point reduction by year-end. The bank expects to reach its inflation target of 3% only by early 2027 and plans to issue an updated forecast in September. The cautious stance is underscored by concerns over inflation risks and the market's reaction to any policy deviations.