Hungarian inflation hits 10-year low
At a Glance
The recent drop in Hungarian inflation to a decade low at 1.2% YoY significantly alters the interest rate outlook for the National Bank of Hungary (NBH). Per the full note from ING, this is driven by a strong forint and favorable food price trends, resulting in expectations for an imminent rate cut in August. In light of these developments, the desk sees a continuation of easing monetary policy as likely, with inflation potentially remaining under 3% for the remainder of the year. Consensus forecasts are now recalibrated to reflect a more dovish outlook for the central bank's next moves, particularly in the absence of fresh economic catalysts in the short term.
Key Takeaways
- 01Hungarian inflation has dropped to a ten-year low of 1.2%, with expectations for more rate cuts.
- 02The strong forint and drop in food prices are key drivers behind this inflation decline.
- 03The market consensus is shifting towards a longer easing cycle from the National Bank of Hungary.
- 04No immediate economic events are on the calendar that could influence the monetary policy outlook.
Full Analysis
What the desk is arguing
The desk believes that the recent decline in Hungarian inflation will lead the National Bank of Hungary to cut rates in their August meeting. According to ING, inflation has now dropped to 1.2%, matching their optimistic forecast and defying broader market expectations which had anticipated higher inflation rates.
This substantial decrease is noteworthy; it is the lowest inflation has been since late 2016, and was significantly influenced by a 1% monthly decline in food prices and moderate energy costs. With inflation metrics defying expectations, the consensus among analysts will likely shift toward a prolonged easing cycle from the NBH.
Where it sits in our coverage
Our consensus target for the EUR/HUF stands at 1.075, with a range forecast between 1.04 and 1.12. Notable firms providing outlooks in this space include: - jpmorgan: 1.10 by Mar-2026 - bofa: 1.04 by Mar-2026
The desk’s call for easing aligns with jpmorgan's more dovish stance and sits near the upper bound of the spread provided by current consensus targets.
How other firms see it
Several firms including jpmorgan anticipate further dovish shifts in monetary policy, reflecting a consistent narrative towards easing in the face of low inflation. Meanwhile, bofa maintains a more cautious view amid concerns about external pressures, leading to their lower target forecast.
As inflation outcomes influence policy decisions, the trajectory of EUR/HUF will be closely tied to developments from the National Bank of Hungary. Any unexpected movements in global commodities could also create volatility in this pairing.
What the calendar says
There are currently no scheduled economic events that might impact the Hungarian monetary policy landscape. With no major data releases lined up, traders should closely watch market reaction to upcoming commentary from the NBH, especially post-rate decision in August.
Market Implications
Traders should focus on the 1.075 level for EUR/HUF as key support, which may strengthen if the NBH announces further rate cuts. Given current market positioning, watch for shifts in sentiment ahead of the August policy meeting—this will be a significant catalyst for the forint’s performance.
From the original
Older quick take Quick take Published 11:50 Hungary Hungarian inflation hits 10-year low July saw record-low inflation as we expected. The strength of the forint and favourable food price developments pulled inflation lower. This makes a rate cut in August a done deal, and an ext
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The recent stability of Hungarian inflation, which dipped to 1.7% in June from 1.8% in May, underlines the effectiveness of the forint in maintaining price stability amidst global geopolitical price shocks. Per the full note from ING, the downward revision of inflation expectations suggests an environment conducive to monetary easing from the National Bank of Hungary. This macro data mirrors shifts observed in broader European trends, where food inflation remains subdued despite broader pressures, creating a diverging narrative among analysts about future monetary policy directions.
Why surprisingly low Hungarian inflation could be a game changer
The unexpectedly low inflation rate in Hungary, falling to 1.8% in May from 2.1% in the previous month, has reshaped the outlook for monetary policy by the National Bank of Hungary (NBH). Per the full note [source], this new data shifts the conversation from the potential for rate cuts to the magnitude of those cuts, with analysts forecasting a possible reduction of either 25bps or 50bps at the upcoming meeting on June 23. This surprising softness signifies not only a rate cut would be likely but also that the broader economic impacts could lead to more aggressive dovish positioning from monetary authorities.