Hungary’s National Bank (MNB) held its key rate at 6.25%, in line with prior guidance to wait for updated June projections, while pointing to higher inflation risks linked to the Iranian conflict and elevated global energy prices. At the same time, the Monetary Policy Council (MPC) acknowledged greater scope to ease policy following a strong forint rally, alongside improving underlying inflation indicators, including seasonally adjusted month-on-month changes in core HICP.
The forint has risen by more than 7% year-to-date, positioning it as the top performer in CEE, and policy-makers have indicated that currency strength could support rate cuts once the June Inflation Report is assessed. Market pricing implies a 25 bp cut over the next 3–6 months, while Commerzbank’s Tatha Ghose expects a couple of cuts in the coming months and sees a 50 bp move as more likely than 25 bp. He forecasts EUR/HUF around 360.0 over the next quarter.
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Policy Outlook Driven By Currency Strength And Easing Inflation
We see the Hungarian National Bank holding its key rate at 6.25%, balancing global inflation risks with a strengthening domestic currency. This cautious stance is temporary, as improving local conditions are creating clear room for easing in the near future. The MNB is simply waiting for its updated June projections to confirm the trend.
The Forint’s strength is undeniable, having gained 7.2% against the Euro year-to-date, making it the top performer in the region. Recent data from the KSH showing inflation easing to 4.1% further supports the case for rate cuts. These factors are creating a compelling argument for the MNB to begin an easing cycle soon.
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Market Positioning And Strategy Recommendations
Given our expectation for EUR/HUF to reach 360 next quarter from its current level of around 365, we see value in entering short EUR/HUF forward positions. The forward market is pricing in only a modest 25 basis point cut over the next six months. We believe a more aggressive 50 basis point move is likely, which is not yet fully reflected in current pricing.
For traders seeking to capitalize on this view with limited risk, buying EUR/HUF put options is an attractive strategy. This allows for participation in the Forint’s expected appreciation while capping potential losses if global risks flare up unexpectedly. Historically, such as during the 2023 easing cycle, the Forint has shown it can absorb moderate rate cuts without significant depreciation as long as the global backdrop is stable.
The MNB’s main concern has been high global energy prices, but with Brent crude stabilizing near $85 a barrel, this risk has moderated significantly. This provides the central bank with the confidence it needs to focus on the domestic picture. We anticipate the upcoming June Inflation Report will provide the final green light for a cut.
