Frantisek Taborsky at ING highlights Hungarian inflation falling to 1.7%, below market and National Bank of Hungary (NBH) forecasts, cementing rate cuts in July and August. Markets price around 150bp of easing and a 4.50% terminal rate, with scope for additional cuts. He sees limited FX impact from rates, expecting EUR/HUF to stay in a 350–356 range while the forint benefits from summer carry demand.

More NBH easing with stable forint

“Hungarian inflation dropped further from 1.8% to 1.7%, below market expectations. This is also below the National Bank of Hungary’s forecast in its June Inflation Report (2.0%). This will therefore cement the rate cuts in July and August.”

“Based on yesterday’s pricing, the market was pricing around 150bp of easing and a 4.50% terminal rate, in line with our forecast, assuming BUBOR remains above the policy rate at the end of the cycle.”

“While this appears sizeable in a global comparison, relative to 2024 there is still room for the market to price in at least one additional rate cut in our view. Conditions are much more favourable than they were two years ago, so we expect the dovish inflation path to push pricing further towards additional easing.”

“This should mechanically be negative for FX. However, we think the rate differential has only a limited impact on EUR/HUF at the moment, with the market more focused on domestic politics and the euro adoption story.”

“In the short term, the forint may come under some pressure as more cuts are priced in, but over the medium term we expect EUR/HUF to stabilise within the current 350-356 range. At the same time, the forint may continue to benefit from summer carry demand.”

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