National Bank of Hungary review: A well-paused decision
The National Bank of Hungary's recent decision to hold its base rate at 5.50% demonstrates a calculated approach to monetary policy, balancing inflation dynamics and geopolitical risk factors. As noted in the full commentary from ING, Governor Varga's hawkish remarks signal that this pause in rate adjustments is strategic rather than passive. The central bank's upwardly revised inflation outlook reflects concerns about imminent inflationary pressure, particularly in fuel and service sectors, while the potential for energy price stabilization looms as a pivotal factor influencing future rate cuts.
What the desk is arguing
The desk posits that the decision to maintain the base rate at 5.50% serves as an intelligent pause, allowing time to assess external influences like geopolitical tensions and domestic inflation pressures. Per the full note from ING, the central bank’s intention to reassess after a period of stability indicates a proactive stance in managing Hungary's economic outlook.
Supporting this argument, ING highlights an anticipation of possible rate cuts within the next six months, contingent on a stabilizing risk environment and reduced energy prices. This view underscores the interplay between local inflation and global energy market dynamics which may create opportunities for monetary easing.
Where it sits in our coverage
As our analysis shows, the consensus target for the EUR/HUF is set at 1.075, with firms such as jpmorgan projecting 1.10 and bofa considering a bearish stance with a target of 1.04. This reflects a spread that suggests ongoing market uncertainty in light of global factors.
The desk's outlook aligns closely with jpmorgan's perspectives on potential easing despite being at the higher end of the spread, hinting at a more optimistic outlook compared to bofa's more conservative estimate.
How other firms see it
Firm assessments appear to be divided; while jpmorgan anticipates favorable conditions for monetary easing, bofa holds a contrary view, reflecting concerns about inflation persistence and risk exposure.
In light of this analysis, movements in the EUR/HUF and shifts in the broader market sentiment toward emerging market currencies could be pivotal indicators of how these policy decisions play out in practice.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01The NHB's decision to pause interest rates at 5.50% is a calculated approach in the current economic landscape.
- 02Inflation concerns are expected to persist, particularly influenced by energy and service costs in the coming months.
- 03The potential for geopolitical risk reduction could open the door for monetary easing later this year.
- 04The consensus target reflects a market divided on the outlook for Hungary's monetary policy trajectory.
Market implications
Traders should keep an eye on energy price movements and their correlation with HUF assets, particularly around the EUR/HUF rate. The next six months will be crucial as market sentiment may shift dramatically based on how external risks evolve and domestic inflation assessments are revised.
Risks to this view
A resurgence in geopolitical tensions or a significant spike in inflation could hinder the NBP's ability to cut rates, causing reappraisals of the market outlook for HUF assets. Additionally, failure to deliver on the EU fund commitments could instigate further delays in monetary easing efforts.
Articles National Bank of Hungary review: A well-paused decision Published 14:53 FX Hungary Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The National Bank of Hungary is not simply doing nothing. Keeping rates unchanged is an active, considered decision, backed by an upwardly revised inflation outlook and a new inflation target from 2028. In our view, this well-judged pause does not necessarily mark the end of the easing cycle.
We still see some chance of rate cuts within six months Peter Virovacz , Frantisek Taborsky and Zoltán Homolya The National Bank of Hungary kept the base rate at 5.50% and Governor Varga sounded hawkish at the press conference 5.50% Key interest rate Unchanged As expected ING's policy view: We see scope for further cuts in six months The National Bank of Hungary held the base rate at 5.50% on 22 September, pressing the pause button after the 'mini rate cut cycle' throughout the summer. Looking ahead, we believe that local politics will honour previous commitments regarding the euro adoption plan, particularly with regard to the medium-term fiscal trajectory, and that EU funds will arrive as expected during the fourth quarter. We expect inflation to remain low and stay below the central bank’s inflation target (3%) for the rest of the year, although we anticipate some acceleration in the months ahead, mostly on fuel and services.
Against this backdrop, the biggest limiting factor for potential future interest rate cuts will be the risk environment. Our base case anticipates a limited stabilisation agreement covering the Strait of Hormuz, military de-escalation and possible sanctions relief following the US mid-term elections in November. This could result in a drop in energy prices towards the end of the year, paving the way for monetary easing in Hungary.
If the risk premium for Hungarian assets drops alongside a general improvement in risk sentiment, we see a chance for two or even three rate cuts in the next six months. We forecast the base rate to reach 5.25% by the end of 2026, with a further reduction to 4.25–4.50% expected by the end of 2027. ING’s market views Today’s NBH meeting delivered exactly what the market expected – a pause in the rate-cutting cycle and a reduction of the inflation target.
From the market's perspective, this was a case of ticking boxes that had been anticipated since the April general election. The market remained virtually unchanged in front-end rates following the NBH press conference, with pricing in less than one rate cut over the next 6–9 months, assuming a positive BUBOR spread over the NBH key rate. The curve has flattened significantly over the past two weeks, aligning with our earlier expectations outlined in our NBH preview.
Nevertheless, we see scope for further flattening, even though the curve is already deeply inverted. At the same time, the front end offers a buffer against a potential geopolitical escalation or a spike in energy prices. We believe the market would not hesitate to price in rate hikes at the front end of the curve if energy prices rise again and Hungarian inflation climbs in the coming months (NBH forecast of 3.1% average inflation for next year).
Meanwhile, the long end still offers room for convergence trades, and long-term yields should grind lower. The combination of a lowered inflation target and a halt to rate cuts creates a very positive environment for the FX market. On the other hand, the global backdrop remains largely negative, despite the recent relief rally.
The US dollar is at record strength, EUR/HUF remains highly sensitive to energy prices, and Federal Reserve rate hikes could trigger renewed pressure on emerging market currencies, which have shown remarkable resilience so far. The overall picture is thus very mixed, and global factors could easily take the driver's seat. Although our bias remains bullish for the forint, and we could retest the 360 EUR/HUF level, further developments are heavily dependent on global factors at this moment.
Our three takeaways from the presser Overall, the tone of the rate-setting meeting and the following presentation can be considered as hawkish with some flexibility added with the data-driven mode. During the press conference, Governor Varga specifically said that this approach gives the Monetary Council the opportunity to cut or hold the rate based on incoming information. The agenda was unusually – though expectedly – packed, with the Monetary Council adopting a new inflation target of 2.5% from 1 January 2028 to start paving the way for eurozone membership and bring Hungary into line with the best practices of regional and developed economies.
However, this is not just for the sake of euro adoption; recent developments (foreign exchange stability, inflation expectations and actual inflation) are also making it possible. In line with best practice, the NBH will hold eight rather than twelve rate-setting meetings from 2027. This less frequent meeting cycle will allow for more robust decision-making, supported by more data, while the Monetary Council can still meet at any time if the situation warrants it.
Governor Varga once again emphasised the importance of FX market stability in reducing and anchoring inflation expectations. These expectations, as well as the perceived inflation by households, have shown further improvement in the third quarter of 2026. We believe that the central bank’s implied objective is to maintain the EUR/HUF exchange rate within its most recent range, while reducing volatility, which could lead to a monetary easing in the foreseeable future.
Updated GDP and CPI forecasts of the NBH (% YoY) Source: NBH, ING "> Source: NBH, ING The updated GDP & CPI forecasts The full macroeconomic assessment and outlook will be published alongside the September Inflation Report on 24 September. Based on the latest GDP and inflation forecasts, the NBH's updated outlook aligns with our expectations. The unfavourable developments in agriculture have worsened the economic outlook, but the negative impact has been somewhat limited by stronger export activity in the industrial sector.
Against this backdrop, the central bank revised its GDP forecast downwards, which roughly matches our latest projections. Regarding inflation, the significant upward revision to the 2027 figure is mostly driven by the energy price shock but also sees some contribution from the recently announced excise duty hikes. However, we estimate that the latter is only having a 0.1ppt impact, with the rest being driven by energy prices.
The 2028 inflation projection is in line with the new target. Regarding alternative scenarios, the Monetary Council highlighted six, four of which were labelled as the most relevant. From both an economic activity and an inflation point of view, the risks are fully balanced, supporting the re-enabled data-driven approach.
Review Policy rate NBH National Bank of Hungary Monetary policy 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 ING's policy view: We see scope for further cuts in six months ING’s market views Our three takeaways from the presser The updated GDP & CPI forecasts
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