The Hungarian central bank has lowered its key interest rate by 0.25 percentage points to 5.50 percent. The cut was in line with analysts’ expectations and marks the third reduction at three consecutive rate meetings, following a sustained fall in inflation across the country.
That disinflation has been rapid, and much of it traces back to the currency. The forint has been boosted by the end of Prime Minister Viktor Orban’s 16-year rule, a political shift that has changed the outlook for investors and lent the currency fresh support.
The forint is also drawing strength from revived Hungarian plans to adopt the euro, a prospect that would tie the country more closely to the eurozone and that markets appear to be pricing in favorably. A stronger currency helps cool imported inflation, reinforcing the central bank’s room to ease.
The inflation figures underscore how far conditions have shifted. Hungarian inflation was measured at 1.2 percent in July, the lowest level since 2016, a striking turnaround for an economy that had contended with some of the highest price growth in the European Union in recent years.
Taken together, the rate cut, the firmer forint and the renewed euro ambitions point to a broader normalization for the Hungarian economy. With inflation subdued and the political landscape realigned, the central bank has been given the space to keep easing, and the coming meetings will show how far it intends to go.
