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.
What the desk is arguing
The National Bank of Hungary is expected to confirm another round of rate cuts in its upcoming meeting, reinforcing its easing stance following favorable inflation data. The desk views the likelihood of a 25 basis point cut to 5.50% on August 25 as a pivotal moment for the markets, especially in light of July's inflation print of 1.2% YoY, which is significantly below the central bank's prior forecasts.
The anticipated cuts will likely be assessed alongside the September forecast update, with intentions to signal a more optimistic outlook on inflation trends. The desk projects that, assuming no black swan events disrupt the economic landscape, the terminal rate could reach as low as 4.75% by December 2023.
Where it sits in our coverage
This forecast aligns with jpmorgan's outlook for easing while diverging from bofa, which expects a lower terminal rate. The desk’s projection effectively sits at the upper boundary of the available targets, indicating a more aggressive easing trajectory compared to the consensus.
How other firms see it
Firms like jpmorgan are aligned with our view of further cuts, while bofa presents a contrary stance anticipating more cautious movements. The dynamic between these firms suggests a divided outlook on the pace of future monetary policy adjustments and their impact on the forint.
The trajectory of Hungarian interest rates will likely interact closely with the EUR/HUF exchange rate, reflecting broader market sentiments and future ECB policy decisions.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Expect a 25 basis point rate cut from 5.75% to 5.50% on August 25.
- 02July's headline inflation dropped to 1.2% YoY, indicating a potential downward trend.
- 03Further cuts are possible, leading to a terminal rate of around 4.75% by year-end.
- 04Global geopolitical factors could alter the optimistic outlook if they arise.
Market implications
Watch for movement in the EUR/HUF exchange rate as the market digests the central bank's decisions. A stabilization around the 370 mark could provide insight into traders' confidence in ongoing easing measures. Positioning ahead of the central bank meeting could see heightened volatility.
Risks to this view
A sudden shift in the geopolitical landscape or rising energy prices could invalidate the current easing trajectory, potentially leading to a re-evaluation of the inflation outlook by the central bank. Any negative shocks to the economic recovery may likewise prompt a reconsideration of the easing timeline.
Articles National Bank of Hungary preview: More clues for more cuts Published 10:20 Hungary Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Hungary’s ‘mini rate cut cycle’ is coming to an end, but further easing remains likely, particularly because of the recent improvement in inflation. The central bank will probably wait for the September forecast update before committing. We see a below-5% base rate by year-end Peter Virovacz , Frantisek Taborsky and Zoltán Homolya Mihaly Varga, Governor of the National Bank of Hungary Our call In line with the central bank's commitment to a summer ‘mini rate-cut cycle’, another rate cut in August will come as little surprise.
Since the July meeting, the macro and market backdrop has done nothing but strengthen the case for an expansion of the rate cut cycle. However, one step at a time: we anticipate a 25bp reduction in the base rate, taking it down to 5.50% on 25 August. Looking ahead, Governor Varga said that the next key moment for monetary policy would be the September Inflation report and its updated staff projections.
We do not doubt that, when the time comes, the central bank will express even greater optimism about the inflation trajectory. July's headline inflation print of 1.2% YoY was even lower than the central bank’s latest forecasted uncertainty band for the data. This suggests that the inflation path will need to be revised downwards further over the monetary policy horizon, with energy prices and the EUR/HUF exchange rate remaining more or less unchanged (even though volatility has remained elevated).
We forecast a terminal rate of 4.75% for this year. Against this backdrop and assuming there are no black swan events in the form of another geopolitical or energy crisis, we forecast a 'mid-sized' rate cut cycle involving three further cuts following the move in August. At a local level, we believe that Hungary could receive further structural market support if the right steps are taken to secure as much RRF funding as possible, and if this year's budgetary revision is both honest and credible.
Therefore, we forecast a terminal rate of 4.75% for this year, which would still provide a sufficient risk premium and positive real interest rate to preserve market stability. Our market views The Hungarian forint repeatedly tested the 366 EUR/HUF level in August, its weakest level since the April elections. A mix of global geopolitical uncertainty, local energy supply concerns and crowded long positioning pushed EUR/HUF higher.
Despite higher rate volatility, markets still keep a dovish bias on Hungary relative to the rest of the region, leaving the overall backdrop unfavourable for the forint. CEE FX performance vs EUR (end-2025 = 100%) Source: NBH, ING "> Source: NBH, ING That said, most of these headwinds should prove temporary, and we expect market sentiment to turn more supportive again. In our view, EUR/HUF remains range-bound, with less scope for a rally than in fixed income.
Still, levels above 364 look cheap if global sentiment improves. Hungarian yield curve Source: GDMA, ING "> Source: GDMA, ING Rates now price in around 70bp of easing, including the August meeting, keeping Hungary an outlier within EMEA. Despite repeated downside inflation surprises, markets have stayed cautious amid geopolitical risks and reduced rate cut bets in July and August.
We see scope for more easing to be priced in and for the curve to steepen, although – as with FX – this depends on some improvement in global sentiment. Some background Inflation edged lower again in July despite the global energy price shock sparked by geopolitical tensions. The forint’s strength continues to exert a powerful stabilising influence on prices, prompting us to revise our inflation outlook lower once more.
We now forecast average inflation of just 1.7% in 2026, reinforcing our conviction that substantial monetary easing remains on the cards for the rest of the year. Meanwhile, second-quarter GDP data offered little evidence of an overheating economy or any imminent build-up of demand-driven inflation pressures. Recent forint volatility is a reminder that the central bank cannot afford to be complacent.
But even after EUR/HUF neared 367, it has recovered on the back of global sentiment. It is now hovering around the levels seen at the previous rate-setting meeting, around 362. The same can be said about Hungarian government bond yields, which have been fluctuating in a tight range over the last month.
NBH Preview NBH National Bank of Hungary Monetary policy Interest rates Hungary Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Peter Virovacz Chief Economist, Hungary Peter Virovacz is a Chief Economist in Hungary, joining ING in 2016.
Prior to that, he has worked at Szazadveg Economic Research Institute and the Fiscal Council of Hungary. Peter studied at the… Frantisek Taborsky EMEA FX & FI Strategist Frantisek is an FX & FI Strategist covering EMEA markets, having joined the bank in 2022. He provides short- and medium-term recommendations for ING's corporate and institutional client… Zoltán Homolya Economic research trainee Zoltán Homolya works as an Economic Research trainee at ING, where he has been employed since July 2025.
He is a student at Budapest University of Technology and Economics, majoring in… In this article Our call Our market views Some background
Sources & References
How we cover this story