Hungarian Forint: Rate path extends beyond summer – ING

ING strategists see Tuesday’s National Bank of Hungary (NBH) decision as the final step in a summer mini rate-cut cycle, but expect easing to continue. They argue improved inflation, with July at 1.2%, supports further cuts, and their forecast has the Hungarian base rate declining to 4.75% by the end of 2026, guided by September’s Inflation Report.

NBH mini-cycle set to extend

"The final interest rate decision of the summer on Tuesday is approaching, marking the last step in the previously announced mini-rate-cut cycle. However, we are almost certain that this isn’t the end of the story, and that the mini-cycle will evolve into a midi-cycle. The July inflation data clearly sets the stage for this."

"The 1.2% inflation rate in July falls outside the uncertainty range of the National Bank of Hungary's June forecast, meaning the overall inflation picture has clearly improved."

"At the same time, we doubt the August interest rate decision will concern anything other than the current situation. The central bank has made it quite clear on countless occasions that the decision on whether to continue the easing cycle will be made in light of the September Inflation Report."

"However, this is unlikely to prompt NBH Governor Mihály Varga and his colleagues to draw hasty conclusions or make premature announcements. In today's rapidly changing world, where geopolitical and global trade developments rewrite economic scenarios every 24 hours, the NBH is unlikely to commit to anything at this point."

"Forward guidance may, however, include a conditional statement regarding the inflation outlook that could signal continued interest rate cuts. According to our forecast, the Hungarian base rate could reach 4.75% by the end of 2026."