Hungary Central Bank Expected to Hold Rates Steady Amid Inflation Risks

Hungary's central bank is expected to maintain its base interest rate at 6.5% for the eighth consecutive month amid persistent inflation risks and a weak economic growth outlook, with minimal easing anticipated through 2025. Governor Mihaly Varga emphasized that the fight against inflation is ongoing and that anchoring inflation expectations is crucial for sustainable inflation control, despite improvements in inflation rates from over 5% to 4.2% in recent months. The National Bank of Hungary continues a cautious monetary policy stance, prioritizing inflation stability over short-term growth, even as economic expansion is projected at just 1% this year, below earlier forecasts. Meanwhile, Federal Reserve Bank of St. Louis President Alberto Musalem highlighted the U.S. central bank's focus on preventing short-term inflation expectations from influencing long-term inflation outlooks, noting the challenges this poses for achieving price stability and maximum employment. Both central banks are contending with inflation uncertainty and the need to manage expectations to safeguard economic stability.