Hungary's central bank lowers its inflation target to 2.5% from 2028
Serguey Asael Shinder2 min readThe Magyar Nemzeti Bank's Monetary Council kept its base rate at 5.50% at its meeting on 22 September, with the overnight deposit and lending rates unchanged at 4.50% and 6.50%. In the same statement it announced a change to its framework: from 1 January 2028 the inflation target will be 2.5%. A separate background analysis, published as a special topic of the September Inflation Report, says the symmetric tolerance band of plus or minus one percentage point around the target stays as it is.
The analysis sets out the reasoning. The MNB says the elements of its framework match international practice, but the level of its target has been higher than both the euro area's and the region's, which is why the review focused on the number. Central banks in advanced economies generally aim for about 2%, while emerging economies often choose somewhat higher targets because higher inflation is one channel through which their price levels converge towards richer countries'. The bank's assessment is that Hungary has already come a long way on that path: its price level is more than two thirds of the euro area average on a purchasing-power basis, with consumer goods at 82% and services at 60.6%, so slower price-level convergence is warranted.
The September statement puts the backdrop in numbers. Inflation was 1.3% in August, with core inflation at 2%. The bank's projection shows inflation at 1.8% this year and 3.1% in 2027, raised for next year because of energy prices and a change to tobacco excise duty, before falling to the 2.5% target by the end of the policy horizon. GDP is projected to grow 1.8% in 2026, 2.9% in 2027 and 2.8% in 2028. The Council said it considers maintaining current rates necessary to reach the target sustainably, and that the fiscal path and euro adoption will shape Hungary's risk assessment.
What it means
A lower target is a commitment that costs something now: it tells markets the bank will tolerate less inflation in future than it has so far, and the Council announced it alongside a cautious stance on rates, which it attributes to high energy prices and an uncertain environment. The statement also makes the link to the euro explicit, and the analysis uses the euro area and the region as its benchmarks - moving the target closer to theirs is part of the same direction of travel.
For readers following the forint, the relevant dates are 7 October, when the abridged minutes are published, and the December Inflation Report. Neither the statement nor the analysis says anything about the exchange rate beyond noting that stable financial markets, particularly the foreign exchange market, support the anchoring of inflation expectations.