Hungary cuts its key interest rate to 5.5%: the lowest level since May 2022

On August 25, the Hungarian central bank, the Magyar Nemzeti Bank, lowered its key interest rate by 25 basis points to 5.5%. The rate was last lower on May 31, 2022, when it stood at 5.4%. The Monetary Policy Council also lowered both ends of the interest rate corridor by 25 basis points each. Effective August 26, the central bank will pay 4.5% interest on overnight deposits and 6.5% on secured overnight loans.

This was the third consecutive cut. Central Bank Governor Mihály Varga had announced the cycle on June 23 and signaled three cuts of 25 basis points each. This completes the series.

“If favorable trends continue, the Magyar Nemzeti Bank sees room for further interest rate cuts over the course of the summer,” Varga said at the time during the press conference following the June meeting.

Inflation Provides the Leeway

The price data was the deciding factor. In July, the annual inflation rate fell to 1.2%. The Hungarian Central Statistical Office (Központi Statisztikai Hivatal) reported that this was the lowest figure in about ten years. The rise expected for the summer did not materialize. The rate is well below the central bank’s inflation target of 3%.

The currency is also providing support. On August 25, the forint traded at 362.62 per euro. Compared to the start of the year, it has strengthened by 5.8% against the euro, 5.3% against the U.S. dollar, and 6.2% against the Swiss franc. A strong national currency dampens imported price pressures and increases the central bank’s room for maneuver.

Several factors argue against further easing. Yields on long-term government bonds are rising worldwide, energy prices remain high, and so do geopolitical risks. The next interest rate decision is scheduled for September 22. On that date, the central bank will also present its quarterly inflation report. It will decide whether the cycle continues or pauses.

A second question is coming into focus: Central Bank Vice President Péter Benő Banai pointed out that Hungary’s inflation target of 3% is higher than that of other European countries. In light of the government’s plans to adopt the euro, a review may be on the horizon. The central bank has so far remained cautious on this matter.

What this means for German exporters

Hungary is a key location in Central Europe for the German machinery manufacturing sector and automotive suppliers. Falling key interest rates make investment loans more affordable for Hungarian customers. Starting this fall, sellers of machinery, equipment, or commercial vehicles will encounter buyers with more favorable financing terms. This applies particularly to small and medium-sized enterprises that have postponed investments since 2023.

The strong forint has a similar effect. German shipments priced in euros become mathematically cheaper for Hungarian buyers. Conversely, the exchange rate undermines the competitiveness of Hungarian exporters. A June survey by the Magyar Nemzeti Bank showed that 17% of the companies surveyed did not expect to be able to sustain an exchange rate of 355 forint per euro for even three months. The current exchange rate is above that level, so the pressure remains.

For German companies with production sites in Hungary, the situation is reversing. Costs in forint are becoming more expensive when calculated in euros. Those shipping from Hungary to the eurozone are losing margin. Both effects must be factored into the calculations for 2027.

Sources: Magyar Nemzeti Bank, interest rate decision of August 25, 2026; Központi Statisztikai Hivatal, consumer prices for July 2026 (HU/EN)

SK, Frankfurt