Hungary's central bank on Tuesday reduced its key policy rate by 25 basis points to 6.25%, marking the first rate cut in almost a year and a half. The Monetary Council of the Magyar Nemzeti Bank (MNB) set the new base rate after monthly data showed annual headline inflation declining to 2.1% from 3.3% the previous month.
The move follows the MNB's assessment that headline inflation has fallen below its 3% target - the first time this has occurred in five years. The rate reduction takes effect from February 25.
Alongside the base rate cut, the MNB lowered other overnight policy rates by the same margin. The overnight central bank deposit rate was reduced to 5.25% from 5.50%, while the overnight collateralized loan rate was cut to 7.25% from 7.50%. The central bank's press release confirmed that each central bank instrument received a 25 basis point reduction.
Monetary policymakers highlighted developments in services prices as an important input to the decision. Services price growth eased to 5%, a metric that Governor Mihaly Varga has previously described as decisive for the timing and scope of monetary easing.
The decision closes a period of relatively stable or higher rates that had persisted through the prior tightening cycle. The MNB conveyed the calibrated nature of the adjustment by applying uniform reductions across its principal overnight rates, with changes effective at the end of February.
While the central bank linked its action directly to the latest inflation readings, the official statements published with the rate decision present the changes as a measured response to the current inflation trajectory. The announced reductions apply to the full set of central bank instruments referenced in the MNB release, each receiving a 25 basis point adjustment.
This report limits itself to the information released by the central bank and the inflation figures cited in the policy statement and related announcements. It does not extend beyond those facts or introduce projections about future policy moves.