Hungarian MNB cuts again, but September decides what comes next
The Magyar Nemzeti Bank cut its base rate by 25bp to 5.50%, completing the three-step summer easing cycle that Governor Mihaly Varga had signalled in June.
The move was fully expected, with all 20 economists surveyed by Bloomberg looking for a cut. More important for markets, the MNB stopped short of committing to further easing, saying the future path for rates will be decided at the September meeting based on the new Inflation Report. That keeps the door open to further cuts, but makes September the real policy decision.
The inflation backdrop clearly preserves room to ease. July CPI slowed to 1.2% YoY, below both expectations and the MNB’s June projection, while core inflation fell to 1.9%.
Food and tradable-goods inflation eased further, and both household and corporate price expectations have softened. The MNB now expects inflation to remain below its 3% target for the rest of 2026 and throughout 2027, before returning to target in the first half of 2028. The counterpoint remains services. Market-services inflation increased on an annual basis, although the Bank attributed much of the monthly rise to repricing in banking and telecommunications following voluntary price restrictions. That makes the details less worrying than the headline services increase might initially suggest.
The Council also noted that Hungary’s risk premium has remained stable, preserving its room to manoeuvre, but made clear that the next stage of easing will depend on more than inflation alone.
Fiscal expectations, the government’s euro-adoption plans and the external market environment will all influence the risk assessment, while the MNB continues to emphasise positive real rates and FX stability. This makes today’s message more nuanced than a straightforward dovish continuation: inflation argues for further cuts, but policymakers are not pre-committing before September. Varga also confirmed that the Bank is conducting a multi-step review of its 3% inflation target, with conclusions due in the autumn.
For the forint, the decision will have limited impact, as it was fully priced. EURHUF remains around 362, while the currency is still more than 6% stronger year-to-date despite 75bp of easing since June.
Our broader view remains for gradual HUF depreciation as the interest-rate differential narrows, with EURHUF at 365 over three months, 372 over six months and 375 over twelve months. A September decision to extend the easing cycle would reinforce that path.
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