Commerzbank analyst Tatha Ghose expects Hungary’s central bank (MNB) to cut its base rate by 25 basis points at today’s meeting. Markets are split between no change and a 25bp cut, and recent comments from Governor Varga have been mixed.
The case for a cut is tied to softer inflation data. Hungary’s January headline inflation was 2.1% year on year. Seasonally adjusted month-on-month core inflation measures are also said to be moving toward the central bank’s target.
Inflation Trends Support A Cut
Disinflation in the Harmonised Index of Consumer Prices (HICP) across the EU is also seen as supporting an easing move. A rate cut is described as consistent with improving inflation conditions.
The forint could be volatile in the short term if rates move lower. However, the view presented is that cutting rates after lower inflation does not automatically reduce the real interest rate.
The article notes it was produced using an Artificial Intelligence tool and reviewed by an editor. It is attributed to the FXStreet Insights Team.
With the Hungarian National Bank (MNB) decision due later today, we expect a 25bp rate cut. Recent data from the Hungarian Central Statistical Office showed January 2026 inflation easing to 3.1%, which supports this move. Broader disinflation trends also help: the latest Eurostat flash estimate puts Eurozone HICP at 1.9%, giving the MNB more room to ease.
Forint Volatility And Positioning
Because official guidance has been mixed, traders may want to prepare for higher forint volatility. A short-term options approach, such as a straddle on EUR/HUF, could help capture a sharp move in either direction. With so much uncertainty, a simple directional trade may be risky.
In 2024 and 2025, Hungary went through a long cutting cycle that steadily reduced the forint’s yield advantage. Another cut today would reinforce that trend and further weaken the appeal of the HUF carry trade that was popular in earlier years. That could argue for unwinding any remaining long-forint positions funded in lower-yielding currencies.
Even though a cut is dovish, the view here is that it should not cause lasting damage to the currency. The move is presented as fundamentally justified, which could help the forint recover after some initial choppiness. Traders may therefore look for chances to go long HUF if an early sell-off looks overdone.
Overnight index swaps are pricing about a 75% chance of a 25bp cut. That means the bigger market reaction would likely come from a surprise decision to hold rates unchanged. That outcome would be seen as hawkish and could trigger a sharp, though possibly temporary, rally in the forint.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
