National Bank of Hungary preview: Gradualism versus a stronger start
At a Glance
The desk anticipates a modest 50 basis point rate cut by the National Bank of Hungary (NBH) next week, driven by sentiment shifts from improved inflation data and geopolitics. Per the full note from ING, the forecast has evolved to expect an upcoming cut bringing the base rate to 6.00%, with a potential cumulative easing of up to 100 basis points by year-end due to a more dovish policy backdrop. This dovish sentiment contrasts with past expectations of inflation persisting above 5%, now adjusted to remain below 4%. Upcoming movements in the forint could reflect these changes in monetary policy as traders adjust their positions ahead of the June 23 decision.
Key Takeaways
- 01Expect a 50bps cut from the NBH next week, aligning with improved inflation figures.
- 02Total easing could reach 100bps this year, with inflation remaining below 4%.
- 03Current inflation expectations have deviated significantly from previous estimates of above 5%.
- 04Traders should monitor EUR/HUF for volatility influenced by upcoming monetary policy shifts.
Full Analysis
What the desk is arguing
The desk expects the National Bank of Hungary to enact a 50 basis point rate cut due to improved inflation outlooks and reduced geopolitical tensions. Per the full note from ING, this is likely to be a careful approach rather than a bold shift, emphasizing gradualism in the central bank's policy.
Recent data indicating inflation falling below 4% supports this outlook, representing a significant shift from earlier inflation forecasts which anticipated a peak above 5% this year. This positive development in inflation reports gives the NBH room to implement an easing without risking economic instability, pushing rates from the current 6.50% down to 6.00%.
Where it sits in our coverage
Our consensus target for HUF/USD is 1.075, with a range from 1.04 to 1.12. Notably, firms like jpmorgan project targets into the Mar-26 period around 1.10.
This view aligns closely with the majority sentiment gathering around cautious easing, contrasting slightly with bofa, which anticipates a more conservative stance, projecting a lower target at 1.04 by the same tenor. The desk's forecast lies above the midpoint of this spread, suggesting a moderate bullish outlook on the forint relative to current market consensus.
How other firms see it
Firms such as jpmorgan and goldman share similar sentiments concerning the easing trajectory of the NBH. Conversely, bofa holds a more cautious view regarding the forint's strength, likely reflecting concerns over long-term sustainability in easing cycles by the NBH.
Traders should consider how the EUR/HUF currency pair may align with the overarching influence of the Eurozone economic environment, particularly in risk-off scenarios. Any notable shifts in the euro area can have amplified effects on the Hungarian currency given its relatively smaller market size.
Market Implications
Traders should prepare for potential volatility in the HUF, particularly if the NBH surprises with an aggressive easing stance. A key level to monitor is the 6.00% threshold on the base rate, which could set the tone for further market adjustments.
From the original
Articles National Bank of Hungary preview: Gradualism versus a stronger start 11:53 FX Hungary Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download A rate cut in Hungary next week looks to be a done deal. Given the downside surprise in inflation and the de
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The desk projects further monetary easing by the National Bank of Hungary, anticipating three additional rate cuts in the coming months. Following the recent cut to 5.50% as part of a planned 'mini cycle' of reductions, markets are shifting their expectations as inflation appears manageable and EU funds are on track to be deployed. Per the full note from ING, ongoing geopolitical tensions and local energy concerns may limit the forint's recovery, but we expect a positive outlook as these are thought to be temporary obstacles.
National Bank of Hungary preview: More clues for more cuts
The imminent rate cut by the National Bank of Hungary signals the central bank's continued commitment to easing monetary policy amid improving inflation metrics. Per the full note [source], a 25 basis point cut to 5.50% is anticipated on August 25, following July’s headline inflation drop to 1.2% year-on-year, which undershot the bank's expectations. This cycle should converge towards a terminal rate of 4.75% by year-end, with the next inflation report in September likely providing additional direction. Given the current positioning, the Hungarian forint may face downward pressure as further policy accommodations are set against a backdrop of steady energy prices and a stable EUR/HUF exchange rate, barring any unforeseen geopolitical shocks.