Hungarian inflation hits 10-year low
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.
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.
How firms align with this view
Aligned with the desk view
Contrary positioning
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.
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.
Risks to this view
A reversal in this outlook could occur if inflation unexpectedly rises due to external shocks, such as a rebound in energy prices or significant adverse weather events impacting food supply. Additionally, a change in sentiment towards global monetary policy tightening could also pressure the forint.
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 extension to the cutting cycle looks highly likely According to our latest flash estimate, inflation may remain below 3% until the end of the year Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Peter Virovacz Chief Economist, Hungary Zoltán Homolya Economic research trainee 1.2% Headline inflation (YoY) ING estimate 1.2% / Previous 1.7% Inflation hits rock bottom just as we expected Consumer prices fell slightly in July compared with the previous month, according to the latest data from the Hungarian Central Statistical Office (HCSO).
Annual inflation eased further to 1.2%, its lowest level since late 2016. This was a major surprise compared to market expectations, as price pressure fell well below consensus forecasts. However, the figure exactly matched our forecast, which had been the most optimistic projection in the market.
The extent of the surprise is highlighted by the fact that inflation fell below the uncertainty range projected in the National Bank of Hungary’s June Inflation Report for July. As a result, despite the energy price shock and drought conditions, inflation has not only avoided accelerating but has also slowed for three consecutive months. Main drivers of the change in headline CPI (%) Source: HCSO, ING "> Source: HCSO, ING The details The negative monthly headline inflation rate is mainly due to a 1% monthly fall in food prices.
This may be partly due to the strengthening of the forint, and partly due to broader international disinflationary trends. This time, the price of household energy fell by almost 1% compared to last month, due to the warmer weather at the end of spring. For methodological reasons, the Statistical Office uses a delayed dataset.
As a significant price drop in fuels was observed immediately after the end of price controls, followed by an increase from mid-month onwards, the average price level for the data collection period was lower, hence fuel prices dragged down the inflation rate as well. In the case of services, the 1.6% monthly price increase can be considered strikingly high, though this was partly attributable to known factors. Airfares rose by more than 4% MoM.
The impact of the previously announced price increases for telephone, internet, and TV subscriptions was reflected, too. Unsurprisingly, the substantial rise in the cost of holiday services also continued, with a monthly increase of nearly 8%. The composition of headline inflation (ppt) Source: HCSO, ING "> Source: HCSO, ING Core inflation moves favorably Annual service inflation jumped to 4.7%, the second-highest figure in this category so far this year behind January.
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