Hungary Central Bank Holds Key Rate at 6.5% Amid Inflation Surge

Hungary's central bank maintained its key interest rate at 6.5% for the fifth consecutive month due to rising inflation, which has accelerated to a 13-month high of 5.5% as of January 2025. This decision, expected by analysts, aligns with the central bank's recent hawkish stance to combat inflationary pressures, effectively ruling out the possibility of rate cuts in the near future. Governor Gyorgy Matolcsy chaired his last policy meeting, with Mihaly Varga set to succeed him, who has expressed a commitment to prioritize price stability. Analysts have revised their inflation forecasts for 2025 upward while lowering economic growth projections, painting a challenging economic landscape ahead of the 2026 elections. The National Bank of Hungary's rate is currently tied with Romania for the highest in the European Union. Despite the pressure from Prime Minister Viktor Orban's cabinet to lower rates, the central bank remains firm on its current policy to preserve its credibility.