The MNB signals a summer mini easing cycle for Hungary
The MNB has restarted easing, and Governor Varga has given the market clear guidance on what will follow.
After cutting the base rate by 25bp to 6.00%, Varga said he sees scope for two further 25bp reductions over the summer, describing the expected path as a mini easing cycle.
That removes the ambiguity around June: this was not a one-off adjustment, but the start of a limited sequence of cuts.
This policy shift reflects a substantial improvement in the inflation outlook. The MNB has sharply lowered its 2026 and 2027 inflation projections, helped by the stronger forint and lower imported-price pressures. This gives the Bank room to reduce rates while keeping real yields positive. However, services inflation and wage growth remain firm, so the message is not one of unconstrained easing.
The MNB is reducing the degree of restriction because inflation has fallen faster than expected, not because domestic price pressure has disappeared.
For EURHUF, the implications are straightforward. Two additional cuts would take the policy rate to 5.50%, reducing the carry support that has helped sustain HUF strength this year. Although EURHUF is currently trading below our 1-month forecast of 360, we stick to our projected path, which rises to 365, 372 and 375 over the 3-, 6- and 12-month horizons. The MNB can ease because HUF strength has improved the inflation outlook; lower rates will gradually weaken the support for that strength.
This reinforces our expectation of EURHUF appreciation over the forecast horizon.