National Bank of Hungary review: All eyes on the next staff forecast
At a Glance
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.
Key Takeaways
- 01Expect three more rate cuts in Hungary, bringing the base rate to 4.75% by late 2026.
- 02Current economic challenges may be temporary, with projections for limited inflation threats.
- 03EUR/HUF has weakened significantly, reflecting market sentiment and regional volatility.
- 04EU fund deployment expected in Q4 could provide a stability boost.
Full Analysis
What the desk is arguing
The desk maintains that the National Bank of Hungary is on a continued path of easing, influenced by pre-announced plans and current economic conditions. As indicated in the commentary from ING, three additional rate cuts could bring the base rate down to 4.75% by the end of 2026, reflecting a sustained commitment to monetary support.
Notably, despite challenging conditions such as elevated geopolitical risks and energy supply issues, the forint has shown resilience. The commentary highlights that EUR/HUF moved closer to 366, indicating a weaker currency position, yet the desk views this as a transient situation linked to current market positioning rather than a long-term trend.
Where it sits in our coverage
Consistent with our analysis, we anticipate a base rate target of 4.75% by late 2026, with firms such as jpmorgan predicting a similar trajectory at 4.80%, while bofa aligns with a cautious approach forecasting 5.00%. Given these projections, our desk's views are situated more optimistically within the wider consensus.
How other firms see it
Among aligned firms, jpmorgan and dtc share a similar dovish outlook on the Hungarian monetary policy, suggesting further cuts will align with a stabilizing economic environment. In contrast, some firms remain wary, with bofa expressing skepticism about aggressive easing amidst external pressures.
Close attention should be paid to the movements of EUR/USD, which might reflect sentiments towards the Eurozone and its interconnectedness with Hungarian policy adjustments. Additionally, fluctuations in energy prices will be crucial in gauging potential impacts on inflation and broader economic stability.
Market Implications
Watch for EUR/HUF around the 366 level as a critical threshold. If it moves further, this could signal deeper market concerns impacting the forint. Additionally, any announcements or movements related to EU funds would influence trader sentiment significantly.
From the original
Articles National Bank of Hungary review: All eyes on the next staff forecast Published 14:00 Hungary Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download In line with the pre-announced 'mini cycle', the National Bank of Hungary continued to cut rates in A