Hungary’s central bank kept its benchmark rate unchanged at 6.5%, the highest level in the European Union, on Tuesday, marking the 11^th month in a row without adjustment.

Policymakers said the restrictive stance remains necessary, with inflation expected to stay above the bank’s tolerance range throughout the year.

A Reuters poll of 21 analysts conducted between 18^th-22^nd August unanimously predicted no rate move. The consensus forecast still anticipates a 25-basis-point cut before the end of 2025, though economists remain split on how much scope there is for loosening policy.

In July, inflation came in at 4.3% year-on-year, surpassing analyst expectations, with price increases in food, services, and household energy as the main drivers.

“A careful and patient approach to monetary policy remains necessary due to risks to the inflation environment as well as trade policy and geopolitical tensions,” the central bank stated.

“Given buoyant consumption, volatile commodity prices and strong wage dynamics, price stability can be achieved in a sustainable manner by ensuring tight monetary conditions.”

At 13:18 GMT, the Forint, having dropped to a two-week low against the Euro ahead of the central bank meeting, was trading at 397 per Euro, slightly weaker than 396.8 immediately following the rate announcement, Reuters reports.

Hungary’s inflation remains elevated despite Prime Minister Viktor Orbán’s government implementing controls on food prices and requiring banks, telecoms firms, and insurers to halt planned fee increases ahead of next year’s election.

Moreover, the central bank has also cautioned that several pre-election measures, such as increases in family benefits and subsidised homebuyer loans, could begin to widen the budget deficit starting next year.

“We think rates will remain unchanged throughout 2025 and that monetary loosening ahead of the election will be limited,” according to Capital Economics analyst Nicholas Farr.

Governor Mihály Varga said at a news conference that the government measures have reduced inflation by 1.5 percentage points. The central bank now expects to hit its 3% inflation target only in early 2027 and plans to release an updated forecast in September.