NBH Policy Statement: A careful and patient approach to monetary policy remains necessary due to risks to the inflation outlook

• Unemployment rate remains low in a historical comparison.
• Due to rising real wages and the government’s income-increasing measures for households, consumption will support growth over the entire forecast horizon.
• Except for tradables, all main product groups contributed to the decline in price dynamics.
• The general improvement in the external cost environment and the pass-through of a stronger forint into purchase prices support disinflation.

• Inflation will remain below 3% in the coming months before temporarily rising close to the tolerance band’s upper bound.
• 3% inflation target may be achieved in a sustainable manner in H2'27.
• Inflation outlook is surrounded by balanced risks.
• In the current economic situation, maintaining the stability of the foreign exchange market is of key importance in reducing inflation expectations.

The National Bank of Hungary's latest policy statement indicates a cautious stance on monetary policy, emphasizing the necessity of patience due to lingering inflation risks. While they project that inflation will remain under 3% in the near term, they acknowledge potential volatility, specifically highlighting that the stability of the foreign exchange market is crucial to managing inflation expectations. This suggests a steady hand at the helm, with a focus on growth supported by rising wages and consumption, but could also imply limited near-term shifts in rate policy as they monitor the inflation landscape.