Hungary’s central bank could still cut interest rates again before the end of 2026 if external conditions improve and the government presents a credible fiscal path connected to euro adoption, Deputy Governor Zoltan Kurali said.
The central bank kept its base rate at 5.5% this week, pausing after four reductions this year. It also lowered its inflation target to 2.5% from 3% as Hungary renews efforts to eventually adopt the euro.
Kurali said Hungary could enter the Exchange Rate Mechanism, or ERM-2, by early 2029 at the latest if the government follows through on the process.
The earliest possible euro adoption date could be January 1, 2032, if Hungary satisfies the Maastricht criteria by 2030.
Monetary policy remains dependent on several variables.
Kurali identified energy markets, the 2027 budget and a medium-term fiscal plan as important factors in determining whether another rate reduction is possible this year.
The euro initiative has also attracted attention in Hungary’s bond market, where investors are assessing whether greater policy convergence with the euro area could reduce long-term financial risk.
For investors, the key intersection is now fiscal credibility, euro convergence and monetary easing.
The next major signal will come from the government’s fiscal plans and whether Budapest formally advances the euro-adoption process.
