ING strategists view the upcoming National Bank of Hungary (NBH) interest rate decision as the final step in a summer mini rate-cut cycle, but anticipate that monetary easing will continue beyond this phase. They highlight that the July inflation rate was 1.2%, which falls outside the uncertainty range of the NBH's June forecast, indicating a significant improvement in the inflation outlook and supporting the case for further rate cuts [1].
The strategists note that the August interest rate decision is expected to focus solely on the current situation, with the NBH likely to refrain from making any premature commitments regarding future policy moves. The central bank has emphasized that decisions about continuing the easing cycle will depend on the findings of the September Inflation Report [1].
Forward guidance from the NBH may include conditional statements tied to the inflation outlook, potentially signaling the possibility of additional interest rate reductions. ING forecasts that the Hungarian base rate could decline to 4.75% by the end of 2026, guided by the central bank's inflation assessments [1].
The report also underscores the NBH's cautious approach, noting that Governor Mihály Varga and his colleagues are unlikely to make hasty announcements in the face of rapidly changing global economic conditions [1].
CONCLUSION
ING expects the National Bank of Hungary to continue its rate-cutting cycle, supported by improved inflation data. However, the central bank is likely to proceed cautiously, with future decisions hinging on upcoming inflation reports. Market participants should watch for conditional forward guidance signaling further easing.