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(Bloomberg) -- Hungary’s central bank adopted a more hawkish monetary policy guidance after a spike in inflation and concern about the impact of geopolitical risks for the recession-hit economy.

The National Bank of Hungary held its main interest rate at 6.5%, matching the estimate of all 25 economists in a Bloomberg survey. That left it even with Romania for the highest key rate in the European Union.

In its post-decision statement, the central bank said “tight monetary conditions” were warranted after upside risks materialized, with no realistic chance of interest rate cuts in the months ahead, Deputy Governor Barnabas Virag said. That’s a change from earlier guidance, which indicated a “further pause” to rate cuts.

“This is a new situation in a qualitative sense,” Virag said. While the central bank plans a “sustained pause” in the key rate, the reference to “tight” monetary conditions should be understood “in all its hues,” he added. He stopped short of predicting rate hikes.

Headline price growth jumped to an annual 4.6% in December, overshooting the central bank’s latest forecast. Price-growth will likely edge higher in January before a forecast resumption of disinflation from February, though from a higher-than-expected level, Virag said. The country needed to stick to “disciplined anti-inflationary” policies to tackle price-growth.

The forint’s weakening over the past months has fueled inflation. The currency fell 4.6% against the euro in the last four months of the year, before rebounding by about 0.9% so far in 2025.

Rate Speculation

The recent gains have prompted money market traders to once again price in some monetary easing. They now expect about a quarter-point reduction in the key rate in six months. Still, economists at OTP Bank Nyrt., Hungary’s largest lender, said on Jan. 15 that the central bank will probably have no rate-cut room this year due to elevated price growth.

Unlike in previous months, there was no proposal for a rate cut on Tuesday, with rate-setters unanimously backing a no change, Virag said.

Economy Minister Marton Nagy has for months urged looser monetary policy to kickstart growth, after data showed a return to a recession in the third quarter. Prime Minister Viktor Orban is looking for positive economic news with his party trailing in polls ahead of parliamentary elections in a little over a year.