The National Bank of Hungary (NBH) is preparing to introduce green financing programmes for homeowners and businesses in January 2025, contingent on inflation and financial market conditions, according to a statement. This comes after the forint fell to its lowest level since March this year.
Despite rate cuts totalling 1,150 basis points, Hungary’s base rate of 6.5% remains the highest in the European Union, alongside Romania’s, following inflation soaring above 25% after Russia’s invasion of Ukraine in 2022.
Amid a sluggish recovery from last year’s recession, Prime Minister Viktor Orban’s government has urged the NBH to implement steeper rate cuts. However, Orban has eased his pressure on the bank anticipating a leadership change in March.
“The primary objective of the NBH is to reach and maintain price stability. This still requires a disciplined and tight interest rate policy,” the NBH told a media house. The bank also noted that its monetary stance will be supported by tighter liquidity next year as crisis-management loans expire, further tightening monetary conditions.
The forint, central Europe’s worst-performing currency this year with a 4% loss against the euro, reached its weakest point in six and a half months on Wednesday, impacted by the escalating conflict in the Middle East. The currency’s decline led the NBH to introduce emergency rate hikes in late 2022 to stabilise it, with Goldman Sachs economists describing the forint’s volatility as the “binding constraint” on further rate cuts.
The NBH added that its Monetary Council would determine the specifics and timing of the green corporate bond programme, which will be limited in size and scope and will not affect overall monetary policy. The bank also mentioned the possibility of easing credit conditions for green housing loans that banks can offer to retail customers next year.
Under a previous green housing initiative launched in October 2021, which closed a year later, the NBH provided 299 billion forints ($831.43 million) in funding to commercial banks, allowing them to lend to retail borrowers at a 2.5% interest rate. Since coming to power in 2010, Orban’s nationalist government has faced challenges in reviving Hungary’s economy, making various efforts to shield borrowers from high interest rates, a move the NBH has criticised for undermining its independence.
