Hungary’s central bank kept its base rate unchanged at 6.5% on Tuesday, citing the need for continued tight monetary policy.

At the same time, it lowered its inflation forecast for 2026 and indicated that future rate decisions would be made on a meeting-by-meeting, data-driven basis.

Governor Mihaly Varga stated that the bank would closely watch corporate repricing at the start of the year and overall financial market stability, and announced a shift in its forward guidance.

“Based on (these factors) the Council will take decisions on the level of the base rate in a cautious and data-driven manner from meeting to meeting,” Varga said during a briefing.

When asked whether this could pave the way for policy easing in early 2026, Varga responded: “If there are favourable developments, in the economy, in inflation and with regard to the exchange rate, if these in total create room for a rate cut, the Monetary Council will be ready for that.”

He added that the bank remains committed to prioritising its 3% inflation target.

“This means a strong change in communication: they will decide in a data-driven way from meeting to meeting about the base rate,” according to Equilor, who added that the briefing “had a dovish tone.”

Interest rates in the central European nation have now remained unchanged for 15 months.

A Reuters news agency poll forecasts a total of 50 basis points in rate cuts by the end of next year, but Varga refrained from providing any guidance on the future rate trajectory.

Furthermore, the National Bank of Hungary (NBH) lowered its 2026 inflation forecast to 3.2%, down from 3.8% projected in September.

The NBH noted that corporate repricings and the timing of the government’s withdrawal of price margin caps introduce some uncertainty into the economic outlook.

In addition, the April 2026 election, where Prime Minister Viktor Orban faces a rising opposition, adds further unpredictability to the fiscal outlook and the future of the price controls that Orban has extended through until the end of February.

The government has set price-margin caps on food and drugstore items, which the NBH estimated reduced headline inflation by 1.5 percentage points.

Hungary’s elevated interest rates have supported the Forint, which has risen nearly 7% against the Euro this year, aiding disinflation. The currency softened slightly to 385.10 per Euro by 14:57 GMT, down from 384.70 before the rate announcement.