Hungary Maintains Key Interest Rate at 6.5% Amid Inflation Concerns

Hungary's central bank has maintained its main interest rate at 6.5% for the fourth consecutive month in response to rising inflation, which reached an annual rate of 4.6% in December. This decision aligns with expectations from economists, as Hungary grapples with high inflation levels, matching Romania for the highest key rate in the EU. Deputy Governor Barnabás Virág noted that geopolitical tensions and market volatility have contributed to inflationary pressures, necessitating a cautious monetary policy approach. Despite some calls for a more relaxed monetary policy to stimulate growth, particularly after a recession, the bank remains focused on achieving its 3% inflation target by 2026. Additionally, the forint has depreciated against the euro, further complicating the economic landscape. The central bank emphasizes that maintaining financial market stability is essential for returning inflation to target sustainably.