Budapest: Hungary has resumed monetary easing as slowing inflation and interest-rate cuts by major global central banks widened policymakers’ room for maneuver.

The National Bank of Hungary (NBH) lowered the key interest rate by a quarter-point to 6.5%, in line with the forecast of all 24 economists in a Bloomberg survey.

That matches Romania’s for the highest benchmark level in the European Union.

The central bank held interest rates steady in August after 15 consecutive monthly cuts.

“The Monetary Council will continue to make cautious, patient and stability-oriented decisions,” Deputy Governor Barnabas Virag said at a Budapest briefing.

Policymakers will continue to consider holding the key rate or cutting it by a quarter-point at each monthly meeting until the end of the year, he said.

The forint was little changed against the euro as investors parsed the statement and briefing for clues about future rate moves. It has dropped about 2.9% year-to-date, underperforming regional peers.

The currency may warrant vigilance going forward, with Morgan Stanley on Monday warning of a steep sell-off due to fiscal and monetary-policy risks in the run-up to the 2026 general election.

Barclays Plc and Citigroup Inc had earlier also taken bearish views on the forint.

The policy pause in August came before the US Federal Reserve (Fed) began lowering its rates and the European Central Bank or ECB delivered the second reduction this year.

Still, Hungary shouldn’t overreact to the effect of the Fed’s decision to cut rates by a mere half-point, according to the deputy governor.

In comments to Bloomberg after the briefing, Virag said the rate path for Hungary hasn’t changed “fundamentally” since August, when he saw just one or two quarter-point cuts before the decision.

Risks include the inflation outlook and risk sentiment, he said.

Hungary’s headline inflation rate fell to the lowest in three and a half years, to an annual 3.4% in August, well within rate-setters’ one percentage-point tolerance band around their 3% target.

The central bank predicts price-growth to slow to 3.1% in September before rising 4.2% in December and then resuming disinflation from the first quarter.

“At this very late stage of the easing cycle the NBH wants to have a fairly high degree of flexibility,” said Piotr Matys, an analyst at InTouch Capital Markets. 

 - Bloomberg