ING economists Peter Virovacz and Frantisek Taborsky expect the National Bank of Hungary (NBH) to start cutting rates at its 24 February meeting. They forecast a 25bp cut, which would take the base rate to 6.25% after 16 months without a change.
They also expect the +/- 100bp interest rate corridor to move lower in line with the base rate. Their outlook leaves room for another 25bp cut in March, depending on inflation and foreign exchange conditions.
Election Risk And The Rate Path
They note that the general election on 12 April could influence later decisions. They project that, if prices and markets remain stable, the NBH could deliver one or two more rate cuts before the end of 2026.
Money market pricing already reflects several 25bp cuts over the next couple of months. The article says it was created with help from an Artificial Intelligence tool and reviewed by an editor.
With the NBH likely to cut its base rate next week on February 24, we should position for lower interest rates. January 2026 inflation of 3.6% looks manageable and gives the central bank room to move. We are considering forward rate agreements and interest rate swaps that should benefit if the expected 25bp cut happens.
This easing cycle also puts downward pressure on the Hungarian forint. We should consider shorting the forint against the euro. The EUR/HUF rate, now steady around 394, may move higher. In 2025, the forint weakened during easing periods, and that pattern could return.
Hedging Into The April Vote
The April 12 election adds a key source of uncertainty, so we need to monitor volatility. We should consider buying EUR/HUF options that expire after the election. These can hedge risk or express a view on a larger move. Implied volatility for April contracts is already rising from late-year lows, suggesting the market is starting to price in this risk.
The expectation of one or two more cuts by the end of 2026 suggests this is the start of a trend, not a one-time change. That supports holding longer-term positions that benefit from a flatter or falling yield curve, as Hungarian government bond yields may keep dropping from the 6.5% levels seen earlier this month. Any short-term forint strength may be a chance to add to short positions.
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