ING economists Peter Virovacz and Frantisek Taborsky expect the National Bank of Hungary (NBH) to start an easing cycle at its 24 February meeting, cutting the base rate by 25bp to 6.25%. They see scope for another 25bp cut in March and possibly one or two further moves before end-2026, contingent on inflation, FX stability and post-election conditions.

NBH set to restart rate cuts

"We believe that the National Bank of Hungary (NBH) is ready to pull the trigger, cutting the base rate by 25bp to 6.25% on 24 February. All the important metrics and market developments suggest that this is imminent. This move would end the 16-month period without a rate change."

"Alongside the cut in the main interest rate, we expect the +/- 100bp interest rate corridor to shift lower in line with the base rate adjustment."

"Looking further ahead, if our short-term inflation and FX forecasts are correct, we believe there may be scope for another 25bp rate cut in March. The general election on 12 April will then have a strong influence on what happens next. However, if price and market stability prevail, we anticipate one or two further rate cuts before the end of 2026."

"Speaking of which, the market clearly accepts the idea of an easing cycle. Based on money market pricing, a series of 25bp rate cuts has already been factored in for the next couple of months. If the Monetary Council does not want to surprise the markets and the signalling of money markets is important to monetary policymakers, this kind of market pricing should guide the central bank towards a rate cut in February and March."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)