The National Bank of Hungary (NBH) announced plans on Wednesday to introduce green financing programs for homeowners and businesses in January, contingent upon inflation and financial market conditions. 

This announcement follows the Forint's decline to its lowest levels since March. 

Despite cuts totalling 1,150 basis points, Hungary's base rate remains at 6.5%, the highest in the European Union, alongside Romania, after an inflation surge exceeding 25% due to the impact of Russia's invasion of Ukraine in 2022. 

Confronted with a sluggish recovery from last year's recession, Prime Minister Viktor Orban's government has urged the National Bank of Hungary to implement more aggressive rate cuts.  

However, the seasoned leader has eased his pressure on the bank in anticipation of a leadership change at the NBH 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 Reuters news agency. 

The bank indicated that its monetary policy will also be reinforced by a tightening of liquidity next year, as significant amounts of crisis-management loans issued previously expire, which will tighten monetary conditions. 

The Forint, which has been central Europe's worst-performing currency with a decline of about 4% against the Euro this year, fell to its weakest levels in six and a half months on Wednesday, influenced by an escalation of the conflict in the Middle East.  

Declines in the Forint led the central bank to implement emergency rate hikes in late 2022 to stabilise the currency.  

Economists at Goldman Sachs have characterised the Forint's high volatility as the “binding constraint” on the speed of future rate cuts.  

The NBH stated that the rate-setting Monetary Council would determine the parameters and timing of the green corporate bond program, which will be limited in size and focused on scope, ensuring it does not impact the direction of monetary policy. 

Furthermore, the NBH also indicated that it might relax credit conditions for green housing loans that banks can provide to retail clients next year.  

In a prior green housing program initiated in October 2021 and concluded a year later, the NBH allocated funding of 299 billion Forints (approximately $831.43 million) to commercial banks, allowing them to lend to retail borrowers at an interest rate of 2.5%.