Hungary's Central Bank Mulls Rate Cut Amid Euro Adoption Plans

Hungary's central bank may still deliver an interest rate cut by the end of this year, according to Deputy Governor Zoltan Kurali. The National Bank of Hungary left its base rate steady at 5.5% on Tuesday and lowered its inflation target to 2.5% from 3%. A pledge by Prime Minister Peter Magyar's cabinet to meet euro entry terms by 2030 implies Hungary could join the Exchange Rate Mechanism (ERM-2) in early 2029, with the earliest date for adopting the euro being January 1, 2032.

Kurali said external market conditions would need to be favorable and a credible deficit-cutting plan presented by the government. Key factors will include energy market developments, the 2027 budget, and a medium-term fiscal plan set to be unveiled next month. The central bank has lowered rates four times this year as inflation remains well below target.

Kurali warned that caution is needed due to high volatility in core market yields and global energy prices. He highlighted strong wage and services price growth as key domestic risks, suggesting companies should boost productivity to avoid a wage-price spiral.