No base rate change yesterday, new details revealed on the draft budget

HUNGARY - In Brief 21 Oct 2026 by Istvan Racz

---

Yesterday's Monetary Council meeting and Mr. Varga's post-meeting presentation almost became non-events, against the backdrop of the government's simultaneous presentation of the 2027 budget, consisting of an unusually long and detailed parliamentary speech by the Prime Minister two days ago, and then a press conference together with the Finance Minister in the following morning, and a series of media appearances by Mr. Magyar during the same day. Apparently, Governor Varga did not want to steal the government's show, and indeed, the current circumstances provided him with an excellent opportunity to behave this way.But anyway, the Council kept the base rate unchanged at 5.5%, just as expected. They referred to the Bank's new, 2.5% inflation target, as the factor necessitating this decision, adding that rising energy prices and global bond yields, in addition to the general global state of high volatility and the threat of rising food prices sooner rather than later essentially ruled out a base rate reduction at this point. However, they are still maintaining a data-driven approach to future decisions, meaning that in principle they could come to a different conclusion already next time if conditions justify a change at the given point of time. They have affirmed their late-September inflation forecast, meaning they see rising inflation between now and mid-2027.Asked by reporters about his reaction on the phasing out of the retail margin caps, as announced by Messrs. Magyar and Kármán in the previous two days, Mr. Varga welcomed the step again, without making any reference to a possible change in the Bank's inflation forecast on that account. So, the MNB essentially re...