The National Bank of Hungary cut its base rate by 25 basis points to 5.5% after its August 2026 meeting, in a move expected by markets and marking the fourth reduction this year. The easing reflects a softer inflationary backdrop: headline inflation fell to 1.2% in July and core inflation eased to 1.9%, even as inflation recently increased in most of Hungary’s trading partners following the outbreak of war in the Middle East. The forint remained stronger than its average level since 2022 and held gains recorded since Magyar was elected Prime Minister, giving the central bank additional room to support the economy. Lower borrowing costs could aid credit growth, consumption, investment and business capital expenditure, although further easing may weaken the currency if global risk sentiment deteriorates. The National Bank of Hungary’s decisions will continue to depend on inflation, domestic economic conditions, the European Central Bank’s policy stance and commodity prices, with Hungary’s reliance on energy imports leaving it exposed to external inflationary shocks.