ING economists Peter Virovacz and Zoltán Homolya report that the National Bank of Hungary kept its base rate at 6.25% on 24 March 2026. They say the bank moved to a more hawkish stance after the war in the Middle East and related market turmoil. They state that headline inflation reached a ten-year low in February, leaving Hungary in a favourable starting position for an external price shock. Under their base case for energy prices, they expect a brief rise in inflation before it settles at about 4% in the second half of the year.

National Bank Of Hungary Holds Rate

They put a 40% chance on their base case and say inflation would stay within the NBH tolerance band if energy effects fade. They also expect flows through the Strait of Hormuz to return to normal by the summer under this scenario. On that path, they forecast room for a rate cut late in the third quarter, with the base rate at 6.00% by year-end. Under a “long war” scenario, which they assign a 30% chance, they expect the forint to need extra support and the NBH to match the ECB with two rate rises over the next couple of quarters. The article was produced using an AI tool and checked by an editor. The National Bank of Hungary’s decision to hold its base rate at 6.25% signals a shift to a more cautious stance due to the war in the Middle East. While this was expected, it puts a pause on the rate-cutting cycle we saw through 2025. This introduces significant uncertainty into the market for the coming weeks.

Market Focus Shifts To Risk

We are in a favourable position as February’s headline inflation print of 3.5% was a ten-year low, providing a cushion against the external price shock. However, the recent spike in Brent crude to over $110 a barrel explains the central bank’s new hawkish tone. The market is now weighing the impact of this energy shock against the backdrop of slowing domestic price pressures. The forint has shown signs of stress, weakening past 405 against the euro last week, which brings back memories of the volatility seen in 2022. This currency weakness is likely the main reason for the central bank’s firm stance. We remember the lessons from that period, when energy shocks sent inflation soaring into double digits and forced aggressive policy tightening. This divergence between a potential rate cut later this year and the risk of hikes creates a prime environment for volatility. Traders should consider buying options strategies, such as straddles on the EUR/HUF exchange rate, that would profit from a large price move in either direction. Implied volatility in forint options has already risen by 15% in the last two weeks, reflecting this uncertainty. The forward rate agreement market is now pricing in roughly a 40% chance of a 25 basis point rate cut by the end of the third quarter, down from 70% just a month ago. This shows how traders are quickly reassessing the path of monetary policy. The key will be to watch energy markets and any news related to shipping through the Strait of Hormuz. If we believe that tensions will ease by summer, positioning for a rate cut in late 2026 through interest rate swaps could be profitable. Conversely, if the conflict appears prolonged, the market may begin to price in rate hikes to support the forint. This would suggest paying fixed on short-term swaps to hedge against a more hawkish central bank. Create your live VT Markets account and start trading now.

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