Hungary central banker says lower inflation, risk premia may have reduced needed rate level

A Hungarian central bank policymaker said falling inflation and lower risk premia may have reduced the interest-rate level needed to maintain price stability, according to a Reuters report published on June 8.

The policymaker, identified by Reuters as Deputy Governor Zoltan Kurali, said the central bank still needs to be cautious because long-term yields and energy prices can remain volatile.

The remarks add to a recent shift in the backdrop for Hungarian monetary policy. On May 26, the Magyar Nemzeti Bank said it was assessing incoming macroeconomic data and the persistence of lower risk premia before deciding on the base rate in a cautious, data-driven way.

In March, the central bank said inflation had fallen back into its tolerance band, a development that has eased pressure on policymakers but has not removed the need for vigilance.

The MNB’s inflation-targeting framework says the base rate is used to achieve price stability, and that market risk perceptions can affect capital flows and the transmission of monetary policy.

For now, the latest comments suggest the bank sees a lower rate path than before as inflation and financial-market conditions improve, but not a case for urgency. The key question is whether the recent easing in risk premia proves durable enough to support further policy changes.