National Bank of Hungary review: ‘Mini’ cutting cycle set to size up
The National Bank of Hungary has initiated a 'mini' cutting cycle, with expectations for two additional rate cuts this summer following a 25 basis point reduction to 6.00%. Per the full note source, inflation pressures have eased sufficiently to motivate this monetary policy shift, as the bank forecasts an average inflation rate of just 2.3% in 2026. With no upcoming high-impact events on the calendar, traders should monitor inflation metrics closely to gauge the sustainability of this dovish tilt, especially against currency positioning in the EUR/HUF pair.
What the desk is arguing
The desk posits that the National Bank of Hungary is likely to maintain a path of monetary easing, evidenced by its latest rate cuts and an improved inflation outlook. As outlined in the recent commentary, the central bank's willingness to adopt a 'mini cycle' of rate cuts reflects a broader commitment to stimulating economic growth in a low-inflation environment.
Importantly, the bank's forecast indicates a significant easing in price pressures, with expected inflation peaking at around 3.5-4.0% by mid-2027. Such forecasts underscore a cautious yet optimistic view of the economic landscape, suggesting that further rate adjustments could be on the horizon.
Where it sits in our coverage
With our consensus target for the EUR/HUF at 1.075, we align with notable forecasts from various institutions, including: - jpmorgan: 1.10 (Mar 26) - bofa: 1.04 (Mar 26)
This view posits the desk's call towards the upper range of expectations, indicating a potential strengthening of the forint depending on continued low inflation metrics.
How other firms see it
Among aligned firms, jpmorgan supports a bullish outlook for the forint in light of this dovish stance, while bofa presents a contrary position, advocating for a more cautious approach towards Hungarian monetary policy. This divergence emphasizes the ongoing debate over the effectiveness of rate cuts in a historically volatile inflation environment.
Indicators such as inflation rates and the central bank's fiscal policy will be critical in shaping market sentiment, particularly in pairing considerations such as EUR/HUF and USD/HUF.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Hungary's central bank is in a 'mini' cutting cycle, with further rate cuts expected.
- 02Inflation is projected to remain low, averaging 2.3% by 2026, supporting the dovish outlook.
- 03No immediate high-impact events in the calendar suggest room for continued monitoring of inflation data.
- 04The EUR/HUF pair remains a crucial indicator for traders to assess Hungary's monetary stance.
Market implications
Traders should keep an eye on inflation reports as they will be pivotal in determining market reactions, particularly regarding any potential deviations from the central bank's projections. A sustained inflation reading above 3.5% could invalidate the current dovish thesis.
Risks to this view
Any significant depreciation of the forint or unexpected inflation spikes could undermine the current easing cycle, forcing the National Bank of Hungary to reconsider its strategy and potentially implement more aggressive rate hikes.
Articles National Bank of Hungary review: ‘Mini’ cutting cycle set to size up 16:13 Hungary Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The writing was on the wall, and the National Bank of Hungary did not disappoint. On the contrary, the revised ultra-low inflation outlook encouraged the Monetary Council to commit to two more rate cuts after today’s reduction during the summer. We envisage at least one additional rate cut to the projected official path Peter Virovacz and Zoltán Homolya The National Bank of Hungary committed to further easing during today's press conference 6.00% Key interest rate (-25bp) As expected ING's policy view: We agree that there is scope for further cuts The National Bank of Hungary cut the base rate to 6.00% on 23 June, matching the expectations in our preview .
When the Monetary Council last decided to ease monetary conditions in February, it clearly avoided the term 'rate cut cycle'. Times are changing quickly, however, and we now find ourselves in a 'mini cycle'. Nevertheless, the significant improvement in the inflation outlook would justify at least a 'midi' cycle, if not a 'maxi' one, if you like fashion metaphors.
The price pressure has eased to such an extent that we are forecasting an average inflation rate of 2.3% in 2026. Before the central bank revealed its new forecast, this figure seemed impressive. Perhaps it is time for us to take a summer retreat and regroup.
To be fair, we have already factored in expected fluctuations in fuel prices and the gradual removal of other price protection measures. Unless the forint depreciates significantly, the outlook for structural developments under this scenario remains favourable. We predict that inflation will peak at around 3.0-3.5% year-on-year.
However, due to base effects and stronger repricing driven by domestic demand, price pressure will continue to creep higher, and the pinnacle of the inflation cycle could reach 3.5-4.0% in mid-2027. Looking ahead, if the external environment remains supportive and local politics deliver on previous commitments to the euro adoption plan, EU funding developments and long-term fiscal adjustments, the risk premium for Hungarian assets could remain persistently low. In this case, we forecast a 'midi' cycle involving three or four further rate cuts sequentially following today's move.
Our terminal rate for this year is 5.00-5.25%. However, if the situation remains favourable as winter approaches, we wouldn’t rule out switching to a 'maxi'. ING’s market views The NBH press conference brought a dovish outcome to the market, particularly due to the very low inflation forecast for this year and next, heading well below our expectations and market consensus – making the NBH the most dovish forecaster on the market.
Also, the commitment to two rate cuts during the summer and calling for a “mini rate cut cycle” may be a reason for the market to see this meeting as clearly dovish. The press conference sent EUR/HUF above 356, but it eventually stabilised somewhere in the 355-356 range. These are levels where we would expect some resistance and attractiveness for new forint buyers.
However, together with the NBH meeting, we also see a switch in global sentiment to be more risk-off with an equity sell-off and a stronger US dollar, which gives the forint additional risk of a sell-off in the near-term. On the other hand, from a rates perspective, the market has basically priced in the rate cuts that the NBH mentioned today. The front-end of the curve does have reasons to rally, and we see further steepening as we discussed in the NBH preview.
Still, this should not be a game-changer for FX. In rates, the market is pushing the NBH rate terminal lower to the 4.50-4.75% range after the press conference, and we are likely to see a further rally in the coming days. This is still higher than we saw pricing in 2024 of around 4.25-4.50% under less favourable conditions for the central bank.
Therefore, we believe the front-end has more room to go lower, and the bull-steepening of the curve will continue. 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 June Inflation Report on 25 June. Based on the latest GDP and inflation forecasts, the NBH's outlook has become much brighter.
The favourable GDP figures for the first quarter, combined with a sharp rise in consumer confidence and a strong improvement in households’ real disposable income, resulted in an upward revision of GDP growth in 2026. On inflation, significant downward revisions have been made across the entire forecast period, with shockingly low projections for both 2026 and 2027. However, these take into account the continued use of price shield measures and price caps, as the decree-turned-law has scrapped the phase-out date.
To provide a more realistic picture, the NBH conducted an alternative calculation, the results of which will be published in the detailed Inflation Report. Regarding alternative scenarios, the Monetary Council highlighted six, four of which were labelled as the most relevant. From an economic activity point of view, the risks are tilted to the upside, while inflation-related scenarios show balanced risks.
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… 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 agree that there is scope for further cuts ING’s market views The updated GDP & CPI forecasts
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